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 that 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.
Authors: Hemawathy Balarama, Asad Islam, Jun Sung Kim, and Liang Choon Wang
Type: Journal Article
Year: 2020
Key Results
- Household-level panel data was collected to estimate the price elasticities of electricity demand for different types of urban households in Bangladesh.
- Results indicate significant heterogeneity in price elasticities by electricity consumption levels.
- Simulations under alternative policy scenarios illustrate how incorporating the heterogeneous nature of price elasticities into pricing policy can help decrease electricity demand-supply mismatch and inequality in electricity consumption.