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Distributional impact analysis of the energy price reform in Turkey

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  • Zhang, Fan

Abstract

A pricing reform in Turkey increased the residential electricity tariff by more than 50 percent in 2008. The reform, aimed at encouraging energy efficiency and private investment, sparked considerable policy debate about its potential impact on household welfare. This paper estimates a short-run residential electricity demand function for evaluating the distributional consequences of the tariff reform. The model allows heterogeneity in household price sensitivities and is estimated using a national sample of 18,671 Turkish households. The model also addresses the common problem of missing data in survey research. The study reveals a highly skewed distribution of price elasticities in the population, with rich households three times more responsive in adjusting consumption to price changes than the poor. This is most likely because the poor are close to their minimum electricity consumption levels and have fewer coping options. In addition, the welfare loss of the poorest quintile -- measured by the consumer surplus change as a percentage of income -- is 2.9 times of that of the wealthiest.

Suggested Citation

  • Zhang, Fan, 2011. "Distributional impact analysis of the energy price reform in Turkey," Policy Research Working Paper Series 5831, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5831
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    References listed on IDEAS

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    9. World Bank, 2009. "Adapting to Climate Change in Europe and Central Asia," World Bank Other Operational Studies 3052, The World Bank.
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    Cited by:

    1. Krauss, Alexander, 2016. "How natural gas tariff increases can influence poverty: results, measurement constraints and bias," LSE Research Online Documents on Economics 68496, London School of Economics and Political Science, LSE Library.
    2. Jun E Rentschler & Nobuhiro Hosoe, 2017. "Illicit dealings: Fossil fuel subsidy reforms and the role of tax evasion and smuggling," GRIPS Discussion Papers 17-05, National Graduate Institute for Policy Studies.
    3. Moshiri, Saeed, 2015. "The effects of the energy price reform on households consumption in Iran," Energy Policy, Elsevier, vol. 79(C), pages 177-188.
    4. Krauss, Alexander, 2016. "How natural gas tariff increases can influence poverty: Results, measurement constraints and bias," Energy Economics, Elsevier, vol. 60(C), pages 244-254.
    5. Jiang, Zhujun & Ouyang, Xiaoling & Huang, Guangxiao, 2015. "The distributional impacts of removing energy subsidies in China," China Economic Review, Elsevier, vol. 33(C), pages 111-122.
    6. World Bank, 2012. "Europe and Central Asia Balancing Act : Cutting Subsidies, Protecting Affordability, and Investing in the Energy Sector in Eastern Europe and Central Asia Region," World Bank Other Operational Studies 11910, The World Bank.
    7. Gassmann, Franziska, 2014. "Switching the lights off: The impact of energy tariff increases on households in the Kyrgyz Republic," Journal of Comparative Economics, Elsevier, vol. 42(3), pages 755-769.

    More about this item

    Keywords

    Energy Production and Transportation; Climate Change Economics; Markets and Market Access; Economic Theory&Research; Environment and Energy Efficiency;

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