The consequences of treating electricity as a right

Robin Burgess, Michael Greenstone, Nicholas Ryan and Anant Sudarshan

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper seeks to explain why billions of people in developing countries either have no access to electricity or lack a reliable supply. We present evidence that these shortfalls are a consequence of electricity being treated as a right and that this sets off a vicious four-step circle. In step 1, because a social norm has developed that all deserve power independent of payment, subsidies, theft, and nonpayment are widely tolerated. In step 2, electricity distribution companies lose money with each unit of electricity sold and in total lose large sums of money. In step 3, government-owned distribution companies ration supply to limit losses by restricting access and hours of supply. In step 4, power supply is no longer governed by market forces and the link between payment and supply is severed, thus reducing customers' incentives to pay. The equilibrium outcome is uneven and sporadic access that undermines growth.

JEL-codes: L94 L98 Q41 Q48 Z13 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2020-01-01
New Economics Papers: this item is included in nep-ene and nep-reg
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Citations: View citations in EconPapers (29)

Published in Journal of Economic Perspectives, 1, January, 2020, 34(1), pp. 145 - 169. ISSN: 0895-3309

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http://eprints.lse.ac.uk/102466/ Open access version. (application/pdf)

Related works:
Journal Article: The Consequences of Treating Electricity as a Right (2020)
Working Paper: The Consequences of Treating Electricity as a Right (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:102466

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