The Short-term Effect of Tariff Increases on Household Electricity Consumption: Evidence from a Country in Transition

Abstract

Estimating the effect of a rise in electricity rates on household demand is challenging because of the endogeneity of tariff increases. In this study, we use a difference-in-differences method to estimate the short-term effect of an increase in residential electricity rates on monthly kWh consumption and household expenditure for electricity in Vietnam. We find that the tariff increase for electricity does not significantly change household demand in the short term, suggesting that electricity is a necessary good with low price elasticity of demand.