Pakistan Institute of Development Economics

JEL Classification : H8, K1, Q4, R2
An Economic Investigation of Corruption and Electricity Theft 
Publication Year : 2013

Theft and corruption are common in electricity distribution systems worldwide. We have analysed electricity theft in the framework of an individual’s choice under uncertainty and through a three-layered principal agent-client model of corruption. The study finds that an individual steals electricity only if the subjective benefits are higher than the associated costs e.g., fine imposed in case of detection or job dismissal. The fair tariffs and efficiency wages along with higher deterrence and active consumer involvement in reporting electricity theft can help in combating corruption and pilferage in electricity sector. Moreover, deterrence through increased probability of detection and conviction are important policy measures.