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Power Sector Reform and Corruption: Evidence from Sub-Saharan Africa

Mahmud I. Imam, Tooraj Jamasb, and Manuel Llorca

March 2018

In order to reduce the influence of corruption on electricity sector performance, most Sub-Saharan African countries have implemented power sector reforms. However, after nearly two and half decades of reforms, there is no evidence whether these reforms have mitigated or exacerbated corruption. Neither is there evidence of performance improvements of reforms in terms of technical, economic or welfare impact. This paper aims to fill this gap. We use a dynamic panel estimator with a novel panel data set of 47 Sub-Saharan African countries from 2002 to 2013. We analyse the impact of corruption and two key aspects of electricity reform model - creations of independent regulatory agencies and private sector participation - on three performance indicators: technical efficiency, access to electricity and income. We find that corruption can significantly reduce technical efficiency of the sector and constrain the efforts to increase access to electricity and national income. However, these adverse effects are reduced where independent regulatory agencies are established and privatisation is implemented. Our results suggest that well-designed reforms not only boost economic performance of the sector directly, but also indirectly reduce the negative effects of macro level institutional deficiencies such as corruption on micro- and macro-level indicators of performance.

Keywords: Panel data, dynamic GMM, electricity sector reform, corruption, Sub-Saharan Africa.
JEL classification: Q48, D02, K23, D73