Price elasticities of residential electricity demand: Estimates from household panel data in Bangladesh

Hemawathy Balarama, Asad Islam, Jun Sung Kim and Liang Wang

Energy Economics, 2020, vol. 92, issue C

Abstract: We collect a household level panel dataset to estimate the price elasticities of electricity demand for different types of urban households in Bangladesh. We use an instrumental variable estimation strategy which exploits exogenous variation in average electricity prices induced by a value-added-tax shock. The results indicate significant heterogeneity in price elasticities by electricity consumption levels. We conduct a number of simulations under alternative policy scenarios to illustrate how incorporating the heterogeneous nature of price elasticities into pricing policy can help decrease electricity demand-supply mismatch and inequality in electricity consumption. The results have important policy implications for developing countries aiming to address major energy issues by implementing tariff reforms.

Keywords: Electricity demand; Price elasticity; Non-liner pricing system; Demand-supply mismatch; Inequality of electricity access; Tariff reform (search for similar items in EconPapers)
JEL-codes: D12 L94 L98 O13 Q41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:92:y:2020:i:c:s0140988320302772

DOI: 10.1016/j.eneco.2020.104937

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