WELFARE ANALYSIS OF ENERGY PRICE VARIATIONS IN PAKISTAN

This study analyzes the impact of energy price variations on households’ welfare in rural and urban areas of Pakistan. Welfare implications of energy price changes are drawn from the estimation of compensating variation associated with simulated energy price increases. For this purpose, an Almost Id...

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Bibliographic Details
Published inPakistan economic and social review Vol. 58; no. 1; pp. 1 - 34
Main Authors Ahmad, Eatzaz, ul Islam Abrar, Muhammad Atta, Saghir, Ghulam
Format Journal Article
LanguageEnglish
Published Lahore Department of Economics, University of the Punjab 30.06.2020
Knowledge Bylanes
University of the Punjab, Department of Economics
Subjects
Acquired immune deficiency syndrome
AIDS
Analysis
Compensation
Consumers
Consumption
Developing countries
Energy consumption
Energy industries
Energy industry
Energy prices
Estimates
Expenditures
Households
Inflation
Low income groups
Prices
Pricing policies
Rural areas
Rural communities
Statistical significance
Subsidies
Taxation
Urban areas
Welfare
Iran
Pakistan
Indonesia
India
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Summary:This study analyzes the impact of energy price variations on households’ welfare in rural and urban areas of Pakistan. Welfare implications of energy price changes are drawn from the estimation of compensating variation associated with simulated energy price increases. For this purpose, an Almost Ideal Demand System (AIDS) is estimated with pooled data of Household Integrated Economic Survey (HIES) over the period 1985 to 2013. The econometric analysis shows that welfare losses resulting from energy price inflation in Pakistan have been substantial. Further, the energy prices in Pakistan have been somewhat regressive. Based on these findings and the consideration that poor households are relatively more vulnerable to energy prices increase, the study proposes to extend a compensation package to poor households in the light of rising energy prices. It is shown that the budgetary impact of the required subsidy would be moderate and can be realized by exempting poor households from certain levies and taxes.
ISSN:1011-002X
2224-4174