In Light of Democracy and Corruption: Institutional Determinants of Electricity Provision.

• Author: Jagers, Sverker C.

1. INTRODUCTION

   Electricity is essential to social and economic development. For example, it has been described as the "lifeblood of the modern economy" (Min, 2015, 2), as most of the economic activities that we see in the world today are dependent upon a steady supply of electricity and a stable system to distribute it. Hence, access to affordable, reliable, and sustainable energy for all has been adopted as number seven of the United Nations' "Sustainable Development Goals" (SDG) (United Nations, 2015a). However, despite its importance for both economic and social activities, and the high and steady demand, there are few incentives for the private sector to contribute to the realization of universal electricity access. Since the private sector will not sufficiently value the positive economic externalities of electrification, electricity is an example of a type of good, such as merit goods or public goods, that could remain underprovided, if solely left to the private sector (Abbott, 2001; Samuelson, 1954), and thus requires public financing. (1) Moreover, the building of large-scale transmission and distribution infrastructure (both key electricity assets) is both expensive and needs investments over a long time, which is usually of little interest to commercial investors. Hence, the fulfilment of SDG 7, i.e. providing electricity to entire populations, is--and will remain--primarily politically driven (Baskaran, Min, and Uppal, 2015).

   One of the central questions in research on the drivers behind the successful provision of public services is what role political institutions play in it. More specifically, does it matter whether a country's political regime is democratic or autocratic? A large strand of previous research argues that democratic regimes are more favorable to public service provision than authoritarianism, because when political leaders are held accountable to the citizens in fair and regular elections, it creates strong incentives among political leaders to deliver broadly demanded public services, including affordable and reliable electricity (Acemoglu and Robinson, 2006; Sen, 1999). However, there are also several reasons why democratic institutions may fail to produce and provide enough public services needed to satisfy the demand of the majority of voters. For example, clientelism may distort political attention away from the general provision of the electricity assets toward the interests of narrower groups (Hicken, 2011; Kitschelt, 2000). Similarly, elected leaders often work with short time horizons (Haggard, 1991; Keefer, 2007), whereas more general provision of goods and services--not least in the form of investments in electrical power infrastructure--is a much longer-term undertaking than governments' regular terms of office.

   Research on the effects of political systems and institutions on energy provision, has often been hampered by a lack of adequate and reliable data. A novel approach is used by Brian Min in his prominent book "Power and the Vote" (2015). By using satellite imagery of night-time lights, together with data on population in specific areas, Min estimates the effect of democratic history on the share of countries' populations that live in lit areas. Using this objective data, Min (2015) finds that countries with longer democratic experience have a higher proportion of people living in lit areas, implying higher electrification rates.

   While the years a country has been democratic are no doubt important for whether it can deliver to its citizens, the age of democracy does not sufficiently capture the processes within political systems that may favor or hamper the universal public service delivery. We argue that in order to gain a more nuanced understanding of how political institutions impact the provision of various societal goods and services, we have to take into account not only factors that shape political incentives to provide such services, but also pay attention to the institutions aimed at generating them. We thus theorize that although there are strong reasons to expect that democratic rules provide politicians with strong incentives to deliver public services--in this case electricity--to citizens, their actual ability to provide such goods is dependent on the access to reasonably well-functioning administrative apparatus. This leads us to estimate the effect of democracy on electricity access conditional on the level of corruption in the public administration.

   The rest of the paper is organized in the following way. First, we describe why democracy is expected to positively affect electricity provision. Thereafter, we theorize how this relationship may be moderated by the presence of corruption. This is followed by a presentation of data and methodology. Finally, we present our results, followed by a discussion and some concluding remarks.

2. POLITICAL INSTITUTIONS AND LARGE-SCALE ELECTRIFICATION

   2.1 Democracy and the provision of societal goods and services - the case of electricity

   Electrification provides access to the benefits of electricity to wide segments of the population. Since there are few incentives for individuals or the private sector to contribute to the realization of universal electricity access, private markets are unlikely to meet this goal. While some private investments in electrification have occurred in specific areas, particularly in large cities, electrification in places with a dispersed settlement and/or low population density, such as rural areas, can and has seldom been motivated by economic calculations. For these reasons, private electric utilities have historically been reluctant to extend electricity services to rural areas. Instead, most countries achieved rural electrification through special national programs and funding arrangements, including the use of subsidies (Zomers, 2003). Hence, undertaking electricity provision to an entire population is primarily politically driven, implying that political institutions play an important role. They determine patterns of electricity provision through the building of infrastructure, subsidies, price regulation, and other regulatory structures (Brown and Mobarak, 2009; Min, 2015).

   One of the central questions in research on the drivers behind the provision of societal goods and services is to what degree and how political regimes and institutions affect it. Democratic institutions are generally believed to favor the provision of public services (Acemoglu and Robinson, 2006; Sen, 1999; Bueno de Mesquita, 2003; Gandhi and Przeworski, 2006; Lake and Baum, 2001; McGuire and Olson, 1996). While governments in authoritarian or semi-authoritarian states also face pressure to provide benefits such as electricity, they normally need support from narrower interest groups than democratically elected leaders typically do. There are strong theoretical expectations that democracy will benefit the interests of the median voter rather than the economic elites (Meltzer and Richard, 1981). In the context of electrification, attention to the interests of the median voter in many cases would imply bringing electricity to rural areas--something that, as argued above, is unlikely to happen without political will.

   Indeed, some empirical studies show that electricity provision matters for citizens' evaluations of political leaders in democracies (for example see Chhibber, Shastri, and Sisson, 2004), which in turn affects political leaders' campaign strategies (Baskaran, Min, and Uppal, 2015). Brown and Mobarak (2009) also find that democratization leads to more electricity use, at least among the poorer countries. Similarly, Ahlborg et al. (2015) link the level of democracy to household electricity consumption in African countries.

   Simultaneously, there are a number of reasons why democratization may not result in electricity provision passable enough to satisfy the voters' demand, e.g., due to politicians focusing on re-election rather than generating general welfare to the voters (Besley and Coate, 1998). In addition, elected leaders often work with short time horizons (Haggard, 1991; Keefer, 2007) whereas provision of societal goods and services--not least in the form of investments in electric power infrastructure--is a long-term undertaking (Min, 2015). Moreover, clientelism and vote buying (i.e. exchange of goods and services for political support) tend to distort the political attention toward the interests of narrower groups (Bratton and Van de Walle, 1994; Bratton and Van de Walle, 1997; Chandra, 2004; Kitschelt, 2000; Hicken, 2011). Furthermore, the empirical evidence for a positive correlation between democracy and public services has also been mixed (Ross, 2006).

   Rather than the level of democracy at a particular point of time, some studies instead assert that it is the accumulated experience with democracy that should matter for democracies' performance in providing societal goods and services, since the effects of democracy should accumulate and unfold over a significant amount of time (Gerring, Thacker, and Alfaro, 2012; Min, 2015). An important study using this approach is that of Min (2015), where he, using the novel and precise satellite imagery data of night-time lights, documents a significant positive impact of democratic experience on the share of population living in lit areas.

   While the literature on democratic accountability and public service provision, including the key study by Min (2015), adds to our understanding of how political decisions are shaped by democratic institutions, we believe we need to take into account the ability of leaders to deliver on their decisions in order to understand the success of large-scale electrification projects. In other words, the focus on accountability and incentive structures for political leaders tends to overlook situations where political leaders wish to provide societal goods and services (because they have strong...