Abstract

MEDINA, Carlos  and  MORALES, Leonardo Fabio. Demand for public utility services and deadweight loss of subsidies: The case of Colombia. Desarro. soc. [online]. 2008, n.61, pp.01-42. ISSN 0120-3584.

We estimate demand functions of electricity and water for the main cities in Colombia, using as source of information the LSMS survey of 2003, and using a nonlinear methodology that take advantage of some particularities of the supply function that allow us identifying the demand in the presence of increasing block pricing, IBP. With the estimated demand functions, we get price and income elasticities, and we estimate the effect of rising subsidized prices to basic consumption of beneficiary families, on their welfare, by estimating their compensated variation and deadweight losses, which we estimate to be roughly US$35 million per year on gross subsidies to water, sewerage and electricity.

Keywords : focalization of subsidies; incidence; welfare; demand functions for public utility services.

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