Impact of energy prices on absolute poverty in Moldova

Abstract

Moldova is a country that imports energy. The energy crisis and repeated increases in end-user tariffs have impacted the population's well-being. This topic is relevant because it examines the vital role of energy security in ensuring citizens' economic well-being. This study aims to evaluate the impact of rising energy prices on absolute poverty in Moldova. Energy prices are one of the main factors affecting household expenditure, particularly for vulnerable groups who spend most of their income on meeting basic needs. The study focuses particularly on the relationship between energy prices and poverty, demonstrating how price fluctuations can exacerbate socio-economic inequality. To achieve this, econometric methods such as ordinary least squares (OLS) and two-stage least squares (2SLS) were employed while addressing issues such as multicollinearity and endogeneity. The results show that rising energy prices reduce disposable income by increasing expenditure on essential goods and services, thereby increasing the financial burden on households. Logically, an increase in absolute poverty will not only decrease the well-being of the population, but also undermine economic stability. Understanding these patterns is crucial for policymakers developing strategies to reduce poverty and ensure inclusive growth. This study proves that, in order to achieve energy security and social equality in Moldova, strategies must be promoted to ensure the availability of energy resources and increase households' resilience to economic shocks.