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

Meera Mahadevan

American Economic Review · 2024 · Volume 114 · Issue 10

DOI: 10.1257/aer.20230248

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.

Keywords

Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior, Bureaucracy, Administrative Processes in Public Organizations, Corruption, Electric Utilities, Industry Studies: Utilities and Transportation: Government Policy, Economic Development: Agriculture, Natural Resources, Energy, Environment, Other Primary Products, Formal and Informal Sectors, Shadow Economy, Institutional Arrangements

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