Electricity connections and firm performance in 183 countries

Abstract

This paper presents new data on the procedures, time and costs associated with first time electricity connections for small, energy-intensive businesses in 183 economies. The study finds significant variation in the time and cost to obtain an electricity connection across countries. In low-income countries, for instance, the cost of an electricity connection is 70 times higher than in high income countries. The study finds that income levels and a newly constructed “Getting Electricity” index that combines data for the three measures (procedures, cost and time) are strongly correlated and that the new index cannot predict electrification rates and losses in the electricity system once differences in income level are considered. However, the new index presented has explanatory power for economic losses that firms report due to the poor quality of electricity supply and the likelihood of bribe payments asked from firms by electric utilities. The paper also finds that procedures for connection processes tend to be more cumbersome in countries where other regulatory processes are also complex, suggesting a persistence of bureaucracy across public sector entities in countries. Finally, the study finds that simpler and less costly electricity connection processes are associated with better firm performance in industries with high electricity needs, such as manufacturing motor vehicles.