Resource information
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.
