Performance of tiered pricing policy for residential natural gas in China: Does the income effect matter?

Abstract

The tiered gas pricing (TGP) policy has been implemented nationwide in the residential sector in China since Jan. 2016. However, knowledge about China’s TGP performance and its influencing factors are limited, particularly the heterogeneous impact of income effect. Using a household-level survey, we attempt to investigate China’s TGP policy performance from a micro perspective, and further examine the impact of income effect on TGP performance, as well as its heterogeneity analysis. The main findings are concluded as follows: (1) We find from a random survey that the proportion of respondents accepting the effectiveness of the TGP performance is slightly higher than 50%. (2) The empirical results prove that in Chinese households, there exists an income effect on the TGP performance, i.e., household income has a significant and negative impact on the TGP performance. (3) Our heterogeneity analysis indicates that the income effect is much larger for the second block groups of households. More specifically, the second block has the largest income effect, followed by the third block, and the first block is the smallest. This paper sheds new light on the tiered pricing policy for residential sector and its heterogeneity policy effectiveness. Accordingly, some targeted policy implications are proposed based on the findings.