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Retail Electricity Subsidy in Vietnam : Review and Welfare Effect Under Reform

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  • Lam Do, Truong Phuong

    (Monash University)

Abstract

This paper examines the subsidy in the retail electricity market from two perspectives: cash transfer and quantity–based subsidy. The cash transfer is measured by three dimensions: benefit incidence, beneficiary incidence, and materiality; The quantity-based subsidy is established under the increasing block rate pricing. Overall, both subsidies are not efficient in supporting the poor. To improve the quantity–based subsidy, three proposals, along with the proposal from the company running the market are examined. The welfare effect under these plans is measured by the change in consumer surplus. Findings from this paper show that the reform should let the first blocks reflect the full marginal cost. Moreover, the price structure should be changed in both marginal price and the intervals. To mitigate the reduction in the quantity–based subsidy, the government should improve the cash transfer by reducing the extortion and targeting more efficiently, especially to poor households who live in rented houses.

Suggested Citation

  • Lam Do, Truong Phuong, 2021. "Retail Electricity Subsidy in Vietnam : Review and Welfare Effect Under Reform," Warwick-Monash Economics Student Papers 31, Warwick Monash Economics Student Papers.
    • Handle: RePEc:wrk:wrkesp:31
    as

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    File URL: https://warwick.ac.uk/fac/soc/economics/research/wmesp/manage/31_-_truong_phuong_lam_do.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Vietnam retail electricity market ; block rate pricing ; welfare effect ; electricity externalities ; demand function ; cash transfer ; quantity-based subsidy JEL Classification: D12 ; D63 ; p Q41 ; Q48;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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