Increasing Block Rate Electricity Pricing and Propensity to Purchase Electrical Appliances: Evidence from a Natural Experiment in Russia

Abstract

This paper provides empirical evidence on the relationship between the increasing-block-rate (IBR) pricing of electricity and the propensity of households to buy major electrical appliances. I use a variation from a natural experiment in Russia that introduced IBR pricing for residential electricity in a number of experimental regions in 2013. The study employs household-level panel data, which records, among others, whether the household has purchased any major electrical appliances during the last three months. Using a difference-in-differences specification, I show that the purchase of major electrical appliances in the regions with IBR pricing has increased by more than 20% (or more than two percentage points). The findings suggest that price-based energy policies may be an effective tool in shaping the behaviour of households.