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

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

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

  • Meera Mahadevan
American Economic Review (Forthcoming)

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%, 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 $0.9 billion, leading to unreliable electricity supply and significant negative consequences for development.

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