Graduate Research and Discovery Symposium (GRADS)

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Many developing countries not only suffer from power shortages but the available power supply also tends to be unreliable. Electricity service providers in these countries struggle to satisfy the demand for reliable electricity service, forcing a large number of households and businesses to incur coping costs on imperfect substitutes to accommodate the frequent and often long power outages. There is no doubt that inadequate investment in the supply side of power sector results in unreliable supply of electricity, but this paper attempts to show that the provision of a reliable electricity service is more than simply an issue related to lack of investments in the supply side of the electricity system. While improving the supply of electricity should be of a first-order concern, taking into account that the reliability is also affected by the interdependence of consumers on the demand side of the electricity system is also important. This study provides some evidence that enforcing property rights can reduce substantially the adverse welfare impacts of power outages on firms.