Document Type : Original Article


1 M.Sc., Student, Department of Public Management- Finance Trends, Islamic Azad University e-Branch

2 Faculty Member, Tehran West Branch, Islamic Azad University, Tehran, Iran


Present study investigates the effect of soaring residential electricity price on the welfare of rural individuals in Guilan Province by Almost Ideal Demand System (AIDS) in which the elasticity’s and welfare variations were calculated by Compensation Variations (CV) and Equivalent Variations (EV) for the time period of 1991-2012. It was shown that the absolute value of income and price elasticity of electricity was less than one unit. Low price elasticity of the demand shows the slight impact of price variations on the demand for electricity in the studied period, on the one hand, and the lack of an appropriate substitute for electricity in residential sector, on the other hand. The calculation of welfare variations and its comparison with the share of electricity in the paid subsidy shows that with 50% and 100% increase in residential electricity price, the cash paid to the households is less that the amount acquired. Accordingly, it can be argued that the direct effect of residential electricity price modification (increase) has not been compensated. In fact, the welfare loss of the households, due to more expensive electricity, is more than the acquired welfare. Yet, in a gradual increase scenario, the calculated CV is less than the payments to the families, and hence it is the only price policy that does not impose a loss on families and improves their welfare.


The meta-frontier framework is adopted to demonstrate Technology Gap Ratio.

Eliminating energy input subsidies has led to significant decrease in greenhouse cucumber production efficiency.

Subsidies elimination has led to decrease of the mean technology gap ratio in greenhouses.


Main Subjects

Ahmadi, A., Zolfogari, M., & Ghaffarnejad Mehrabani, A. (2009). A comparative study on ARIMA methods and artificial neural network in predicting domestic demand for electricity. Iranian Journal of Economic, 41,107-122.
Amini Fard, A., & Estedlal, S. (2003). Estimate the domestic electricity demand in Iran a co-integration approach. Eighteenth International Conference on Electricity, 20-22th October(236-246), Tehran, Company Tavanir.
BuShehri, A.M., &   Wohlgenant, K. (2012). Measuring the welfare effects of reducing a subsidy on a commodity using micro-models: An application to Kuwait's residential demand for electricity. Energy Economics, 34(2), 419-425.
 Cebula, R. J. (2012). Recent evidence on determinants of per residential customer electricity consumption in the US: 2001-2005. Journal of Economics and Finance, 36 (4), 925-936.
Çetinkaya, M., Basaran, A., &, Bagdadioglu, N. (2015). Electricity reform, tariff and household elasticity in Turkey. Utilities Policy, 37, 79-85.
Deaton, A., & Muellbauer, J. (1980). An Almost Ideal Demand System. American Economic Review, 70, 312-326.
Eshchanov, B., Grinwis, M., & Salaev, S. (2012). Price and Income Elasticity of Residential Electricity Consumption in Khorezm Cotton, Water, Salts and Soums. Economic and Ecological Restructuring in Khorezm, Uzbekistan. Springer, Dordrecht, ISBN 978-94-007-1962-0, Pp. 141–153.
Farajzadeh, Z. (2003). Subsidy reform and the mitigation of poverty. Unpublished thesis, Department of Agricultural Economics, Faculty of Agriculture, Shiraz Univercity, Iran.
Ghaderi, J., & Estedlal, S. (2009). The effect of electricity price increases on welfare net income of different groups in Iran (1967-2004). Journal of Economic Research, 9(1), 101-120.
He, X., & Reiner, D. (2016).Electricity demand and basic needs: Empirical evidence from China's households. Energy Policy, 90, 212–221.
Laraki, K. (1989). Food subsidies: A case study of price reform in Morocco. Washington, DC: The World Bank LSMS Working Paper, 50.
Mehdizadeh, Y. (2011). Measurement of welfare variations resulted from the fulfillment of Iran subsidy reform plan by AIDS and LES demand systems. Unpublished thesis, Department of Economy, Faculty of Humanities, Tabriz University, Iran.
Meier, H., Jamasb, T., & Orea, L. (2013). Necessity or luxury good? Household energy spending and income in Britain 1991–2007. The Energy Journal, 34(4), 109–128.
Mirzamohammadi, S., & Karimi, S. (2011). Residential demand for electricity in Iran. Paper presented at The 12th International Symposium on Econometric Operation Research and Statistic, 26-28th May. Denizli, Turkey.
Poorazarm, A. (2005). The estimated household electricity demand in the province. Journal of Economic Essays Iran, 2(4), 137-182.
Romero-Jordán, A., PablodelRío, B., & CristinaPeñasco, N. (2016). An analysis of the welfare and distributive implications of factors influencing household electricity consumption. Energy Policy, 88, 361–370. The Department of Energy (2012). Energy balance sheet. Department of Energy.