Household Energy Prices on Inequality: Partial Analysis of Iranian Microdata by EASI Demand System

Abstract

The equality implications of tariff design for household gas and electricity, two essential substitutes, present a significant concern for policymakers. In this study, we examine this issue using a sample of household income quartiles across various social groups, exploring the diverse effects of changes in electricity and gas prices. The findings reveal that an increase in gas prices exerts a more pronounced impact on low-income groups compared to an equivalent increase in electricity prices. Our partial analysis indicates that gas exhibits less elasticity, likely attributed to the absence of a suitable substitute in the event of a price increase for this commodity. This observation underscores the lack of energy diversity that is rooted in the critical role of gas appliances in cooking and heating. This phenomenon poses a potential threat to the energy security of Iranian households.

Keywords

• household energy pricing
• electricity
• gas
• easi demand system