Residential electricity pricing in China

The paper aims to evaluate the implications of the new residential pricing system in China by examining price and income elasticity of demand by different household types. We use pre-reform annual panel data for 29 provinces over a fourteen year period, from 1998 to 2011, applying feasible generalize least squares models. The price and income elasticities for household sector are -0.412, and 1.476 at nation level, -0.300 and 1.550 in urban areas and -0.522 and 1.093 in rural areas respectively. 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 respectively. The empirical results reveal that there is important heterogeneity in the responsiveness to electricity price changes according to household income level and location