Price elasticity of residential electricity demand in Vietnam 2012-16

The document researches the price elasticity of residential electricity demand in Vietnam from 2012-2016. The study's goal is to estimate price elasticity using detailed national-scale household data and to determine whether households respond to marginal price (MP) or average price (AP) under an increasing block tariff (IBT) schedule. Econometric techniques, including instrument variables (IVs) for actual price and system GMM estimators, are applied to address issues of endogeneity. The data for the research comes from the Vietnam Household Living Standard Surveys (VHLSS) and includes information on electricity bills, consumption, prices, and temperature. The results show that in the short-run, household electricity demand is elastic and responds more to marginal price than to average price. Long-run elasticity appeared positive, which was unexpected and may be due to a lack of price variation in the dataset. The implications for policy include the consideration that a single price schedule would not be appropriate if the government's objective is to stimulate electricity savings. The research also suggests that recent increases in electricity prices are likely to decrease household demand significantly. Future research directions include updating data for more precise estimates and exploring other methods for estimating long-run functions due to the lack of price variation.