rafmacalaba/datause-encoder-data huggingface dataset:
Policy Research Working Paper 9718

# **Abstract**

This paper estimates a model of household-level demand for electricity services and electricity demand in the Indian state of Rajasthan using a combination of household-level survey and administrative data. The model incorporates customer-level demographic characteristics, billing cyclelevel weather variables, and the fact that households face increasing block prices of electricity. The model allows estimating consumer response to price changes by four categories of energy services demand, namely, heating and cooling, lighting, and for domestic and business end-uses. The knowledge of demand response across different end-use helps in differentiating the impact of price changes along the income distribution. The model finds that the demand for heating and cooling energy is the most price inelastic and income elastic service, whereas the demand for domestic end-use is the most price elastic and income inelastic service of all four categories. The structural demand model also helps in comparing the welfare implications of current energy tariffs to those based on normative principles of efficient retail electricity pricing. For this analysis, first, the social marginal cost of electricity is calculated using publicly available data on generation, transmission, and distribution losses and emissions. The social marginal cost estimate, in combination with observable household characteristics, is then used to examine alternative tariff structures that are more affordable, equitable, and revenue sufficient for the utility than current price structure. An alternative tariff design, comprising of an energy price set to the social marginal cost of electricity and a fixed cost component determined by proxy indicators of household willingness to pay, performs better on the above parameters than the current schedule. Other sources of technical losses, related to transmission or distribution, are not studied in this paper.

This paper is a product of the Poverty and Equity Global Practice. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The authors may be contacted at ssinharoy@worldbank.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
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# **Introduction**

One of the implicit dimensions of the climate policy debate is the extent to which supply-based responses may substitute for demand-side efforts. These efforts indeed are perceived as requiring transformations of individual and collective behaviors, and technological optimism on the decarbonization of the energy supply is a way of getting round the political difficulties of demand-side policies.

The difficulty in evaluating the potential of supply-side responses is that, at any point in time, any such assessment depends on technological forecasts which are necessarily self-fulfilling in nature. But at the same time, the forecasts are indicative of the global outlook that prevails when they are elaborated.

Therefore, in order to put into perspective the controversies between technological optimism and pessimism, the following meta-review performs a retrospective analysis of past (and recent) forecasts to reveal the long-run trends in the outlook of experts about the potential of future energy options to go out of fossil based energies. It conducts a comparative assessment of world and US energy forecast studies. The main reason why the US is singled out is that US-focused studies are the only ones whose geographic scope does not vary from year to year. For example, in the global studies, Japan is alternately aggregated with the “rest of OECD” or with other industrialized Asian nations. Furthermore, the definition of Europe varies across studies and over time from six member states to twenty-seven today.

A total of 32 studies have been selected,<sup>2</sup> encompassing 116 scenarios in which we compute the relative shares of primary energy in three groups of primary energy sources:

- nuclear energy;

- renewable energy (RE), excluding biomass and traditional energy;

- fossil fuels.

All studies deliver a finer level of detail on renewable energies (e.g. biomass, hydraulic or wind) and on the breakdown of primary energy from different sources (coal, oil, gas). A more aggregate analysis is unfortunately needed to secure the comparability of a larger sample of studies. But the price to pay for this aggregation is not so high, given that what matters is less to describe the precise composition of the energy portfolio than to capture the structural expected shifts in the primary energy supply, with a focus on fossil fuels and within the substitutes to fossil fuels the main and politically sensitive difference between nuclear energies and other carbon free energies.

The main challenge in comparing studies conducted over a period of about 36 years is that their forecasts cover different time periods. To overcome these difficulties and make the best use of the material we defined two presentation modes: (1) Relative shares in 2010: We interpolated (and extrapolated for the few studies of the early seventies which very often covered year 2000) the projected values in each study for 2010. This date made it possible to use the maximum of carried out studies with the same

> 2 A list is given in the annex.

2
subject to an experimental design. Recipients of the program were then asked “Do you think that the training or other assistance that you got from the program helped you get a job or perform better on the job?” They compare these self‐reports of the program’s effectiveness to the experimental estimates and find very little relationship between what participants say and these experimental estimates. This is an interesting finding, although as the authors acknowledge, there are a number of problems with the question asked to assess beliefs about counterfactuals: the question they use does not explicitly prompt respondents to think in counterfactual terms, does not specify a time period to assess impact over, and does not provide quantitative estimates of the counterfactual. They note that these are common problems of almost all participant evaluation studies, and recommend that future studies use more sophisticated subjective expectations questions that explicitly ask about counterfactuals. This is the approach we test in this paper, with the added advantage of also asking the control group counterfactual questions about their outcomes if they had been treated.

Murgai et al. (2016) ask participants in a workfare program in India whether they would have been employed or not, and how much they would have earned without workfare. They use this information to form the counterfactual in the context of a non‐experimental evaluation. While they do not have an experimental control group to compare the treatment group’s expectations to, they show that the elicited expectations of casual labor earnings are very similar to those earned by other people doing casual labor in these villages. In such a setting, in which the counterfactual to treatment is just to be doing something that the individual has been doing for years before, with little dynamics, expectations are likely to not differ very much from simply reporting past earnings, and may be reasonably accurate. McKenzie et al. (2013) provide an additional example of this, showing that Tongan immigrants in New Zealand have reasonably accurate expectations of what they would have earned had they not migrated, because this would be very similar to what they earned before migrating. In contrast, they find the control group underestimates how much they could earn by migrating.

Our setting is one which is dynamic, with firm owners attempting to grow their businesses even in the absence of taking up the program. On top of this general growth, business incomes are highly volatile, and many idiosyncratic factors can determine whether firms survive, and how much they can expand. As a result, with business start‐ups, forming expectations requires more than simply saying that this year will be like all the years before unless the program is taken up.

4
34 Table 7:15 BIGGEST RELATIVE PRICE INCREASES 19'39-1996 (controlled prices - underlined, administrative prices - bold)

|#|sector i|RP'199 6|#|sector i|RP'Igg|
|---|---|---|---|---|---|
||||||6|
|**1**|**central heating and hot water supply**|**5.419**|**11**|**rents**|1.709|
|2|gas|4.939|12|hairdresser's and cosmetic care|1.651|
|3|**drugs**|**3.151**|13|publications|_1.556_|
|4|bread|2.68|14|furnace fuels|1.545|
|**5**|**electricity**|**2.274**|15|grains, cereals and their products|1.527|
|6|local<br>transport|2.18||||
|7|health|2.067|26|culture and arts|1.152|
|8|dairy products|2.036|**38**|**postal and telecom services**|**0.969**|
|9|dry-cleaning, dyeing and other|1.793|55|vodka|0.587|
|10|national transport|1.785||||

_source: author's calculations using GUS data_

# Section 7: ADMINISTERED PRICE INCREASES

Having acknowledged the special role of administered price increases in the process of establishing the new relative price structure, I now turn to the final topic of this paper which links those increases to the overall relative price variability and inflation.

Even though the evidence clearly points to utility prices as the ones that outpaced inflation the most, it is remarkable that after a dramatic upward shift that occurred during 19891992, their relative prices remained fairly stable afterwards, This suggests that the process of adjustments came to a halt in 1992 and administered increases just make up for inflation since then. However, as Pujol and Griffiths (1996) point out, the process is still very far from being
> <sup>13</sup>

To assess this question, the following system and its analog for long-run financial sector development are estimated: (3) _Security of property rights_ ( _1975_ ) = _β1_ + _β2ln(initial financial sector) i_ +

# _β3(_ **political/institutional variable** _) i_ + **Xi ′β4** + _εi_

(4) _Growth of the financial sector i_ ( _1975-2000_ ) = _α1_ + _α2ln(initial financial sector) i_ +

# _α3(_ **predicted security of property rights)** + **Xi ′a4** + _μi_

These regressions simply ask whether the component of secure property rights that can be explained by politics or political institutions is a significant determinant of financial sector development.

# **Data**

The regressions below require data on financial sector development and the political characteristics of countries. For the first, estimates below rely on _private credit_ , total credit extended to the private sector by banks and other financial institutions. This variable is the preferred measure of financial sector development in Beck, et al. (2001) and is taken from the Financial Structures Database of the World Bank (see Beck, Demirgüç-Kunt and Levine 2000). Beck, et al. (2001) describe this as the preferred measure of financial sector development.

Four different measures of political institutions or competition are evaluated here. All are taken from the _Database of Political Institutions_ (Beck, et al. 2001), running from 1975 – 2000. In contrast to the measures used in much of the literature, those here are all objective and easily replicable by others. The _checks_ indicator is an objective counterpart to a subjective measure often used to capture checks and balances, “ _Executive Constraints_ ” from the Polity IV database. It measures how many political actors can block proposed
# **Appendix E: Telecommunications Ownership Shares in Kenya, Tanzania, Uganda, Rwanda, COMESA and SADC**

# **Kenya**

Based on data from the Kenyan Communications Commission, there are now more than 30 million telephone subscribers in Kenya, where all but about 200,000 are mobile telephone subscribers. The companies providing telephone services in Kenya and their market shares are: Safaricom, 65.5%; Airtel, 17.0%; Essar Telekom Kenya, 9.9%; and Telekom Kenya, 7.6% (combined mobile and fixed line subscribers) and TTCL, 1%.<sup>37</sup> According to the Safaricom website,<sup>38</sup> the corporate structure in 2013 is 40% owned by Vodafone UK, 35% Government of Kenya and is 25% publicly traded open stock. We allocate 1 percent of this open stock to SADC and leave the remainder unidentified. Airtel is 95% owned by its Indian parent company. Kenyan businessman Naushad Merali owns 5 percent.<sup>39</sup> Essar Telekom Kenya is wholly owned by the Essar Group of India.<sup>40</sup> Telekom Kenya is 49% owned by the government of Kenya and the remainder is owned by France Telekom.<sup>41</sup> This identifies 84.6% of the ownership. Scaling all identified shares up proportionately so that the sum of the shares is 100%, yields the following **shares for the regions of our model: EU = 35.5%; Kenya = 32.5%; Rest of World = 30.7%; SADC = 1.2%; others = 0.**

# **Tanzania**

The Tanzanian Communications Regulatory Authority indicates that the companies providing telephone services in Tanzania and their market shares are: Vodacom, 37%; Airtel,

> 37 Communications Commission of Kenya (2013), “Quarterly Sector Statistics Report, April-June 2013,”  Available at: http://www.cck.go.ke/resc/downloads/Q4_201213_STATISTICS_final_25th_oct_2013.pdf.

> 38 http://www.safaricom.co.ke/about-us/investor-relations/investor-dashboard/corporate-fact-sheet.

> 39 /Airtel-freed-from-20-per-cent-local-ownership-rule/-/539550/1632440/-/mkvcm0z/-/index.html A Kenyan court

> ruling has freed Airtel from the 20% local ownership share requirement.

.http://www.businessdailyafrica.com/Corporate-News.

> 40 http://www.businessdailyafrica.com/Corporate-News/Yu-confirms-search-for-new-investors/-/539550/1880876//h20lebz/-/index.html

> 41 See “Tanzanian govt considers plan to take 100% ownership of TTCL,” _TeleGeography_ , February 13, 2013. Available at:  http://www.telegeography.com/products/commsupdate/articles/2013/02/13/tanzanian-govt-considersplan-to-take-100-ownership-of-ttcl/

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**Figure 23: Real Effective Exchange Rate**

<!-- Start of picture text --> (2005=100)<br>250<br>200<br>Brazil<br>150<br>Chile<br>Mexico<br>100<br>Uruguay<br>50<br>0<br><!-- End of picture text --> Source: IMF International Financial Statistics.

71. Several trends of the current global economic environment further heighten the need and urgency for structural transformation:

- As a result of tailwinds of buoyant capital inflows and high commodity prices, domestic demand has started to hit capacity constraints in the high-growth economies in LAC and the region is showing signs of overheating.

- The crisis in the Euro-zone and the weak recovery in the United States create considerable risks given that these are the most important export markets for the region. Obviously, to the extent that the risk of a catastrophic meltdown materializes, growth prospects will be substantially and adversely affected.

- The decoupling of cyclical GDP growth between emerging and advanced economies since 2009 may not continue. If world economic growth falls significantly, it is conceivable that growth in LAC will fall sharply.<sup>32</sup>

72. Against this background, the region faces additional pressures to further develop its competitiveness with other regions, particularly those in other Southern markets, such as China and other East Asian markets, and diversify its economies.

73. The next sections will discuss the historical evolution of Latin America and elaborate a framework that will help to develop a possible response for Latin America to facilitate the structural transformation needed to allow the region to achieve sustainable high growth through diversification and meet the challenges arising from the new world economy.

> 32 World Bank (2012c).

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2004 DHS for a selection of 9 districts, as well as estimates at the all-Malawi level.<sup>25</sup> These can be compared to predicted HIV prevalence estimates in the DHS 2000. Assuming fairly stable prevalence rates over this time period, a comparison of 2004 district level estimates versus those for 2000 can provide an informal validation check on the small area estimation procedure outlined in this paper. At the national level, the SAE methodology yields an estimated prevalence of 13.2% in the DHS 2000, which is very close to the prevalence of 13.3% derived directly from the 2004 DHS (Figure 1, and Table 6). When we compare the predictions across the North, Central and South regions, we find, again, that the predicted prevalence rates in the DHS 2000 are quite close to those obtained directly in the DHS 2004, while being quite distinct from those obtained directly from the 2001 Sentinel survey (Figure 1).

District level estimates are, on the whole, also fairly close (Table 6). For example in Blantyre HIV prevalence amongst women aged 15-49, based on the SAE procedure applied to the 2000 DHS, is estimated at 20.4%. This can be compared to 22.5% observed directly in the 2004 DHS. Similarly, in Mzimba the 2004 DHS yields an estimate of 6.4%, only a bit lower than the SAE based estimate of 8.6% in the 2000 DHS.

While these results are encouraging, it is important to note that agreement between the 2004 DHS and SAE-based predictions from the 2000 DHS is not inevitable. Table 7 illustrates the case for the district of Lilongwe. Observed prevalence in the 2001 Sentinel survey is estimated at 20.0%. This is markedly higher than the predicted prevalence, of 11.1% based on the SAE methodology and the DHS 2000. It is even more dramatically at odds with the prevalence estimate observed in the 2004 DHS of 1.6%. NSO (2005) discusses serious concerns with non-response in Lilongwe and presents an alternative prevalence estimate for the 2004 DHS, after adjustment for non-response, of 11.5%. This adjusted estimate is very close to the SAE predicted prevalence estimate but remains a good deal lower than the sentinel survey based estimate. A second example of disagreement between the 2004 DHS estimate and the SAE based estimate from the 2000 DHS concerns the district of Zomba (Table 6). In this case the 2004 DHS estimate of 24.6% is markedly higher than the SAE estimate of 13.4% based on the 2000 DHS. It is unclear why such glaring disagreement should arise in this case, but again it is

> 25 We draw on National Statistical Office (NSO) of Malawi, 2005, for the 2004 DHS-based estimates.

15
<!-- Start of picture text --> JYnged Skates<br>Canada<br>France<br>Germany<br>Sweden 20%<br>Australia<br>U/nited Kingdom -1.3 m<br>Japan<br>* Total change Average annual change-<br><!-- End of picture text --> Note: General govemrment employment encompasses<sup>pefsonnel at the central, regional and local levels. Changes in</sup> With the exception of Australia,<sup>public enterprise</sup> Germany refer to 1985-89 and<sup>those inCanada to 1984-88.</sup> employees have **been** excluded. Source: **OECD**
industries when market size and conditions allow (see Salvo (2010) for the case of Brazil).<sup>26</sup> These findings and considerations have important implications for public policy, specifically the long-standing program to reduce entry barriers and increase competition in low- and middle-income economies. Measured entry barriers are subject to selection issues. HallwardDriemeier and Pritchett (2015) criticize the focus on reforming de jure entry barriers measured by the Doing Business indicators (Djankov et al., 2002; World Bank, 2020a) on the basis that such barriers need not bind when firms have the ability to side-step official procedures, i.e., by operating through “deals versus rules.” Similarly, ineffective anti-monopoly policy in an economy need not imply that cartels are widespread. This paper demonstrates how a transparent industry equilibrium model and data on market prices, quantities, and market structure can be used to move beyond de jure indicators to measure de facto entry and operating costs and firm conduct.

While we would not necessarily advocate against further deregulation of entry or more resources for antitrust investigations, these results do challenge the hypothesis that such policies could have an impact on markups and prices in industries like cement that feature increasing returns to scale. To the extent that there are also increasing returns in other industries, this observation is consistent with decelerating progress against extreme poverty in economies such as Rwanda and Senegal that have deregulated entry (World Bank, 2020a) but nonetheless remain small markets by international standards (see Goldberg and Reed (2021)). Atkin and Donaldson (forthcoming) survey research showing how trade (i.e., market size) can increase competition in developing economies. In such contexts, policy makers may find that prices and markups are more responsive to policies that enlarge the national market, for instance regional integration or the reduction of trade costs through increasing road density.

> 26Even for Dangote, abnormal profits are likely not due only to the direct exercise of market power in cement but rather stem from the firm’s exclusive long-term right to exploit several vast reserves of limestone (a key input into cement production) and the ability to foreclose potential rivals in vertically related markets (World Bank, 2016). Supported by this advantage at home, the firm established new production and import facilities across Africa, possibly contributing to price reductions on the continent.

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