Lighting Up Bihar: Electrification to Sustain Economic Growth
Power supply, in many developing countries, is stuck in a cycle of non-payment and unreliable service. Customers do not pay because supply is poor, and the state-run utilities do not upgrade supply because, even if some customers did pay in full, the utility would go bankrupt supplying their neighbors at the same time. In partnership with the distribution utility in the state of Bihar in India, this project experimentally evaluates a group-level incentive designed to solve this collective action problem by coordinating improvements in local payments and supply. We study an incentive scheme wherein the government utility links hours of power supply in each neighborhood to aggregate payment rates from that area, so that higher-paying groups are guaranteed to earn more reliable supply. In addition, our project seeks to provide experimental evidence on the relationship between electricity supply and small business creation and household welfare.