The Consequences of Treating Electricity as a Right

Michael Greenstone, Nicholas Ryan and Anant Sudarshan

No 14416, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Electricity; distribution (search for similar items in EconPapers)
JEL-codes: O3 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (38)

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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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