Distributional impact analysis of the energy price reform in Turkey, Vol. 1 of 1

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Distributional impact analysis of the energy price reform in Turkey

Author:	Zhang, Fan;	Collection Title:	Policy Research working paper ; no. WPS 5831
Country:	Turkey;	Date Stored:	2011/10/05
Document Date:	2011/10/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	Europe and Central Asia
Report Number:	WPS5831	SubTopics:	Energy Production and Transportation; Environment and Energy Efficiency; Climate Change Economics; Markets and Market Access; Economic Theory & Research
Volume No:	1 of 1

Summary: 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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