پژوهشهای اقتصادی (Apr 2009)
The Effect of Electricity Price Increase on Net Welfare of Different Income Groups
Abstract
The purpose of this paper is to investigate the effect of increasing electricity price on compensated variation (CV) and deadweight loss (DWL) of different income groups in Iran over the 1967-2004 period. An autoregressive distributed lag (ARDL) model is employed and five electricity demand functions are estimated for different income groups and based the estimates, CV and DWL are calculated. The effects of electricity price increase on CV and DWL are examined and the following results are obtained: • Comparing CV in different income groups shows that CV increases from the poor to the rich. • Comparing DWL in different income groups shows that DWL increases from the poor to the rich. • By increasing electricity price and using direct subsidy, the welfare of low and middle income groups increase while the welfare of high income groups decrease.
