The Consequences of Treating Electricity as a Right

Journal Article
Published on 1 February 2020

Abstract

This paper seeks to explain why billions of people in developing countries either have no access to electricity or lack a reliable supply. Burgess, Greenstone, Ryan and Sudarshan (2020) 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.

Authors

Robin Burgess

London School of Economics and Political Science

Nick Ryan

Yale University

Anant Sudarshan

University of Chicago