The Price of Power: Costs of Political Corruption in Indian Electricity

Meera Mahadevan

American Economic Review, 2024, vol. 114, issue 10, 3314-44

Abstract: Politicians may target public goods to benefit their constituents, at the expense of others. I study corruption in the context of Indian electricity and estimate the welfare consequences. Using new administrative billing data and close-election regression discontinuities, I show that billed electricity consumption is lower for constituencies of the winning party by almost 40 percent, while actual consumption, measured by nighttime lights, is higher. I document the covert way in which politicians subsidize constituents by manipulating bills. These actions have substantial welfare implications, with an efficiency loss of US$0.9 billion, leading to unreliable electricity supply and significant negative consequences for development.

JEL-codes: D72 D73 L94 L98 O13 O17 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/aer.20230248

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