[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v113y2018icp663-672.html
   My bibliography  Save this article

The welfare effects of energy price changes due to energy market reform in Mexico

Author

Listed:
  • Moshiri, Saeed
  • Martinez Santillan, Miguel Alfonso
Abstract
Despite being a large energy producer and exporter, Mexico may soon become a net total energy importer due to a decline in oil reserves and increasing domestic consumption. To increase efficiency in the energy market, Mexican authorities approved a constitutional amendment aiming to open the state-run energy markets to competition in 2013. The reform is expected to raise efficiency and to lower energy prices in the long run. However, it will take some time for the new institutional arrangements to settle and the reform objectives to materialize. The removal of subsidies, which is expected to take place after the reform, will also raise prices particularly in the short run. In this paper, we analyze the effect of likely energy price changes due to energy market reform on household consumption and welfare in different income groups. We estimate the QUAIDS model using the nonlinear SURE method and the Mexican household budget surveys for the period 2002–2012 to obtain elasticities. The results show great heterogeneity in elasticities across energy types and income groups. Specifically, energy demand is elastic with respect to income, but changes in prices have mixed effects among energy types. The welfare effect of the price changes on low-income households will be 9 times stronger than that on the mid-income households and 18 times on and the high-income households. This warrants a compensation package to make the reform socially acceptable.

Suggested Citation

  • Moshiri, Saeed & Martinez Santillan, Miguel Alfonso, 2018. "The welfare effects of energy price changes due to energy market reform in Mexico," Energy Policy, Elsevier, vol. 113(C), pages 663-672.
    • Handle: RePEc:eee:enepol:v:113:y:2018:i:c:p:663-672
    DOI: 10.1016/j.enpol.2017.11.035
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421517307814
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2017.11.035?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Adeyemi, Olutomi I. & Hunt, Lester C., 2007. "Modelling OECD industrial energy demand: Asymmetric price responses and energy-saving technical change," Energy Economics, Elsevier, vol. 29(4), pages 693-709, July.
    2. Hunt, Lester C. & Judge, Guy & Ninomiya, Yasushi, 2003. "Underlying trends and seasonality in UK energy demand: a sectoral analysis," Energy Economics, Elsevier, vol. 25(1), pages 93-118, January.
    3. Xavier Labandeira & José M. Labeaga & Miguel Rodríguez, 2006. "A Residential Energy Demand System for Spain," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 87-112.
    4. Attanasio, Orazio & Di Maro, Vincenzo & Lechene, Valérie & Phillips, David, 2013. "Welfare consequences of food prices increases: Evidence from rural Mexico," Journal of Development Economics, Elsevier, vol. 104(C), pages 136-151.
    5. Galindo, Luis Miguel, 2005. "Short- and long-run demand for energy in Mexico: a cointegration approach," Energy Policy, Elsevier, vol. 33(9), pages 1179-1185, June.
    6. LaFrance, Jeffrey T & Pope, Rulon D., 2006. "Full Rank Rational Demand Systems," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt8qx7n6p9, Department of Agricultural & Resource Economics, UC Berkeley.
    7. Jennifer Alix-Garcia & Craig McIntosh & Katharine R. E. Sims & Jarrod R. Welch, 2013. "The Ecological Footprint of Poverty Alleviation: Evidence from Mexico's Oportunidades Program," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 417-435, May.
    8. Brian P. Poi, 2012. "Easy demand-system estimation with quaids," Stata Journal, StataCorp LP, vol. 12(3), pages 433-446, September.
    9. Gabriel Di Bella & Mr. Lawrence Norton & Mr. Joseph Ntamatungiro & Ms. Sumiko Ogawa & Issouf Samaké & Marika Santoro, 2015. "Energy Subsidies in Latin America and the Caribbean: Stocktaking and Policy Challenges," IMF Working Papers 2015/030, International Monetary Fund.
    10. LaFrance, Jeffrey T & Pope, Rulon D., 2006. "Full Rank Rational Demand Systems," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt8qx7n6p9, Department of Agricultural & Resource Economics, UC Berkeley.
    11. Uri, Noel D. & Boyd, Roy, 1997. "An evaluation of the economic effects of higher energy prices in Mexico," Energy Policy, Elsevier, vol. 25(2), pages 205-215, February.
    12. Tooraj Jamasb & Rabindra Nepal & Govinda R. Timilsina, 2017. "A Quarter Century Effort Yet to Come of Age: A Survey of Electricity Sector Reform in Developing Countries," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    13. Benedict Clements & David Coady & Stefania Fabrizio & Sanjeev Gupta & Baoping Shang, 2014. "Energy subsidies: How large are they and how can they be reformed?," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    14. Moshiri, Saeed, 2015. "The effects of the energy price reform on households consumption in Iran," Energy Policy, Elsevier, vol. 79(C), pages 177-188.
    15. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," Journal of Econometrics, Elsevier, vol. 147(2), pages 210-224, December.
    16. Barnett, William A. & Serletis, Apostolos, 2008. "Measuring Consumer Preferences and Estimating Demand Systems," MPRA Paper 12318, University Library of Munich, Germany.
    17. Narayan, Paresh Kumar & Smyth, Russell, 2005. "The residential demand for electricity in Australia: an application of the bounds testing approach to cointegration," Energy Policy, Elsevier, vol. 33(4), pages 467-474, March.
    18. John Dimitropoulos & Lester Hunt & Guy Judge, 2005. "Estimating underlying energy demand trends using UK annual data," Applied Economics Letters, Taylor & Francis Journals, vol. 12(4), pages 239-244.
    19. Chang, Yoosoon & Martinez-Chombo, Eduardo, 2003. "Electricity Demand Analysis Using Cointegration and Error-Correction Models with Time Varying Parameters: The Mexican Case," Working Papers 2003-08, Rice University, Department of Economics.
    20. Bentzen, Jan & Engsted, Tom, 2001. "A revival of the autoregressive distributed lag model in estimating energy demand relationships," Energy, Elsevier, vol. 26(1), pages 45-55.
    21. Carla Valdivia de Richter, 2013. "Green Growth Challenges and the Need for an Energy Reform in Mexico," OECD Economics Department Working Papers 1095, OECD Publishing.
    22. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
    23. Bruce D. Meyer & James X. Sullivan, 2011. "Consumption and Income Poverty Over the Business Cycle," Research in Labor Economics, in: Who Loses in the Downturn? Economic Crisis, Employment and Income Distribution, pages 51-82, Emerald Group Publishing Limited.
    24. Giancarlo Moschini, 1995. "Units of Measurement and the Stone Index in Demand System Estimation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(1), pages 63-68.
    25. Moshiri, Saeed & Aliyev, Kamil, 2017. "Rebound effect of efficiency improvement in passenger cars on gasoline consumption in Canada," Ecological Economics, Elsevier, vol. 131(C), pages 330-341.
    26. Susan W. Parker & Petra E. Todd, 2017. "Conditional Cash Transfers: The Case of Progresa/Oportunidades," Journal of Economic Literature, American Economic Association, vol. 55(3), pages 866-915, September.
    27. Hunt, Lester C. & Ninomiya, Yasushi, 2005. "Primary energy demand in Japan: an empirical analysis of long-term trends and future CO2 emissions," Energy Policy, Elsevier, vol. 33(11), pages 1409-1424, July.
    28. Haas, Reinhard & Schipper, Lee, 1998. "Residential energy demand in OECD-countries and the role of irreversible efficiency improvements," Energy Economics, Elsevier, vol. 20(4), pages 421-442, September.
    29. Larsen, Bodil Merethe & Nesbakken, Runa, 2004. "Household electricity end-use consumption: results from econometric and engineering models," Energy Economics, Elsevier, vol. 26(2), pages 179-200, March.
    30. Lewbel, Arthur, 1991. "The Rank of Demand Systems: Theory and Nonparametric Estimation," Econometrica, Econometric Society, vol. 59(3), pages 711-730, May.
    31. Rosas-Flores, Jorge Alberto & Gálvez, David Morillón, 2010. "What goes up: Recent trends in Mexican residential energy use," Energy, Elsevier, vol. 35(6), pages 2596-2602.
    32. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
    33. Berndt, Ernst R. & Botero, German, 1985. "Energy demand in the transportation sector of Mexico," Journal of Development Economics, Elsevier, vol. 17(3), pages 219-238, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pereira Uhr, Daniel de Abreu & Squarize Chagas, André Luis & Ziero Uhr, Júlia Gallego, 2019. "Estimation of elasticities for electricity demand in Brazilian households and policy implications," Energy Policy, Elsevier, vol. 129(C), pages 69-79.
    2. Rosas-Flores, Jorge Alberto, 2017. "Elements for the development of public policies in the residential sector of Mexico based in the Energy Reform and the Energy Transition law," Energy Policy, Elsevier, vol. 104(C), pages 253-264.
    3. Gholami, M. & Barbaresi, A. & Torreggiani, D. & Tassinari, P., 2020. "Upscaling of spatial energy planning, phases, methods, and techniques: A systematic review through meta-analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 132(C).
    4. Ramírez, José Carlos & Ortiz-Arango, Francisco & Rosellón, Juan, 2021. "Impact of Mexico's energy reform on consumer welfare," Utilities Policy, Elsevier, vol. 70(C).
    5. Alatorre, José Eduardo & Ferrer, Jimy & Galindo, Luis Miguel & Reyes, Orlando & Samaniego, Joseluis, 2016. "Cambio climático, políticas públicas y demanda de energía y gasolinas en América Latina: un meta-análisis," Documentos de Proyectos 40841, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    6. John Curtis & Brian Stanley, 2016. "Analysing Residential Energy Demand: An Error Correction Demand System Approach for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 47(2), pages 185-211.
    7. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," Journal of Econometrics, Elsevier, vol. 147(2), pages 210-224, December.
    8. Okonkwo, Jennifer Uju, 2021. "Welfare effects of carbon taxation on South African households," Energy Economics, Elsevier, vol. 96(C).
    9. Sharimakin, Akinsehinwa & Glass, Anthony J. & Saal, David S. & Glass, Karligash, 2018. "Dynamic multilevel modelling of industrial energy demand in Europe," Energy Economics, Elsevier, vol. 74(C), pages 120-130.
    10. Shojaeddini, Ensieh & Schreiber, Andrew & Wolverton, Ann & Marten, Alex, 2024. "Consumer demand and the economy-wide costs of regulation: Modeling households with empirically estimated flexible functional forms," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    11. Luis Miguel Galindo & Jimy Ferrer Carbonell & José Eduardo Alatorre & Orlando Reyes, 2015. "Metaanálisis de las elasticidades ingreso y precio de la demanda de energía: algunas implicaciones de politica pública para América Latina," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 38(75), pages 9-40.
    12. Chang, Dongfeng & Serletis, Apostolos, 2012. "Imposing local curvature in the QUAIDS," Economics Letters, Elsevier, vol. 115(1), pages 41-43.
    13. Andreas Chai & Nicholas Rohde & Jacques Silber, 2015. "Measuring The Diversity Of Household Spending Patterns," Journal of Economic Surveys, Wiley Blackwell, vol. 29(3), pages 423-440, July.
    14. Suganthi, L. & Samuel, Anand A., 2012. "Energy models for demand forecasting—A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(2), pages 1223-1240.
    15. Kira Lancker & Julia Bronnmann, 2022. "Substitution Preferences for Fish in Senegal," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(4), pages 1015-1045, August.
    16. Jorge Alberto Rosas Flores & David Morillón Gálvez & Rodolfo Silva, 2024. "Effects of Removing Energy Subsidies and Implementing Carbon Taxes on Urban, Rural and Gender Welfare: Evidence from Mexico," Energies, MDPI, vol. 17(9), pages 1-17, May.
    17. Denni Tommasi, 2016. "Household Responses to cash Transfers," Working Papers ECARES ECARES 2016-20, ULB -- Universite Libre de Bruxelles.
    18. Apostolos Serletis & Libo Xu, 2020. "Demand systems with heteroscedastic disturbances," Empirical Economics, Springer, vol. 58(4), pages 1913-1921, April.
    19. Huntington, Hillard G. & Barrios, James J. & Arora, Vipin, 2019. "Review of key international demand elasticities for major industrializing economies," Energy Policy, Elsevier, vol. 133(C).
    20. Moshiri, Saeed & Aliyev, Kamil, 2017. "Rebound effect of efficiency improvement in passenger cars on gasoline consumption in Canada," Ecological Economics, Elsevier, vol. 131(C), pages 330-341.

    More about this item

    Keywords

    Energy; Elasticities; Household budget; Market reform; Welfare; Mexico;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • 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
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:113:y:2018:i:c:p:663-672. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.