The Research On The Consumption Effect Of Residential Electricity Price Distortion In China

In order to improve the economy level and the people’s livelihood as well as social equity,China has provided low-price electricity to the residential sector for a long time.Due to the inability to reasonably reflect the power supply cost and market supply and demand,the residential electricity price is distorted to a certain extent.The continuous and in-depth reform of marketoriented allocation of factors,electricity system reform and the goal of carbon peak and carbon neutralization all urgently require rationalizing the electricity price mechanism and restoring the commodity attribute of electricity.However,the price of electricity is related to people’s livelihood,and electricity price distortion may have a potential impact on people’s consumption.In order to explore the consumption effect of residential electricity price distortion in China,this paper measures the degree of residential electricity price distortion in China,and theoretically analyzes the impact of residential electricity price distortion on household consumption based on consumer choice model and Slutsky equation.Then,the instrumental variable method(2SLS)is used to empirically study the impact of residential electricity price distortion on household consumption level and consumption structure and its mechanism,so as to provide suggestions for promoting the residential electricity price system that is compatible with fairness and efficiency and promotes consumption and people’s livelihood.This paper aims to study the impact of residential electricity price distortion on household consumption.First of all,this article theoretically analyzes the path of residential electricity price distortion affecting household consumption through income effect and complementary effect.Based on the consumer choice model and Slutsky equation,it is found that residential electricity price distortion will not only increases household electricity consumption,but also affect the consumption of other commodities.On the one hand,it may come from the consumption demand increased under the income effect,on the other hand,it may come from the extrusion effect of electricity consumption on the consumption of other commodities.The promotion of residential electricity price distortion on the consumption of commodities that have a complementary relationship with electricity is entirely caused by the income effect,and there is no extrusion effect.Secondly,the Ramsey pricing model and the price difference method are used to measure the degree of residential electricity price distortion.The results indicate there is a widespread negative distortion in residential electricity price in various regions of China from 2014 to 2018.Furthermore,the data from the China Family Panel Studies(CFPS)from 2014 to 2018 were matched with the data of residential electricity price distortion indicators,and the instrumental variable method was used to empirically analyze the impact of residential electricity price distortion on household consumption level and structure.The results show robustly that,the residential electricity price distortion significantly increases household consumption levels,especially the consumption of household electricity,food,clothing,equipment and daily necessities,transportation and communication,culture and entertainment and other consumption.Residential electricity price distortion has a greater effect on rural household consumption than urban households.Whether in urban areas or rural areas,the promotion effect of residential electricity price distortion on household consumption is mainly reflected in the improvement of high-income household consumption.Furthermore,the mechanism test results show that income effect and complementary effect are effective intermediary mechanisms for residential electricity price distortion to promote household consumption.In the end,on the basis of the conclusions above,policy suggestions from three aspects are proposed in the paper:promoting the market-oriented reform of residential electricity price,improving the consumption promotion measures matched with the residential electricity price reform,and establishing a fair and efficient compatible residential electricity price system.