Residential Electricity Pricing in China

This article evaluates the new residential pricing system for electricity in China by examining price and income elasticity of demand by household type. We used prereform annual panel data for 29 provinces from 1998 to 2011, applying feasible generalized least squares models. The price and income elasticities for household sectors are -0.412, and 1.476 at the national level, -0.300 and 1.550 in urban areas, and -0.522 and 1.093 in rural areas. With regional effects, the price and income elasticities are -0.146 and 1.286 for urban households in coastal provinces and -0.772 and 1.259 for urban households in inland provinces. The empirical results reveal that there is important heterogeneity in the responsiveness to electricity price changes by household income level and location.