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Distributional impact analysis of the energy price reform in Turkey

  • Zhang, Fan
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    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.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5831.

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    Date of creation: 01 Oct 2011
    Date of revision:
    Handle: RePEc:wbk:wbrwps:5831
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    1. Bauwens, L. & Fiebig, D. G. & Steel, M. F. J., . "Estimating End-use Demand: a Bayesian Approach," CORE Discussion Papers RP 1090, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    3. Yamagata. T., 2005. "On Testing Sample Selection Bias under the Multicollinearity Problem," Cambridge Working Papers in Economics 0522, Faculty of Economics, University of Cambridge.
    4. Bernard, J.T. & Bolduc, D. & Belanger, D., 1993. "Quebec Residential Electricity Demand: A Microeconometric Approach," Papers 9334, Laval - Recherche en Energie.
    5. Petersen, H. Craig, 1982. "Electricity Consumption In Rural Vs. Urban Areas," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(01), July.
    6. World Bank, 2009. "Adapting to Climate Change in Europe and Central Asia," World Bank Other Operational Studies 3052, The World Bank.
    7. Kilian, Lutz, 2007. "The Economic Effects of Energy Price Shocks," CEPR Discussion Papers 6559, C.E.P.R. Discussion Papers.
    8. Nesbakken, Runa, 1999. "Price sensitivity of residential energy consumption in Norway," Energy Economics, Elsevier, vol. 21(6), pages 493-515, December.
    9. Michael Parti & Cynthia Parti, 1980. "The Total and Appliance-Specific Conditional Demand for Electricity in the Household Sector," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 309-321, Spring.
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