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The political economy of public utilities: A study of the power sector

  • K.P. Kannan

    (Centre for Development Studies)

  • N. Vijayamohanan Pillai

    (Centre for Development Studies)

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    In this paper, we attempt at an analysis of the political economy of the Indian power sector with special reference to Kerala in the light of a generic model of the political economy of public utilities we develop in the first part of the paper. The model seeks to explain the political economy of the rent seeking drives in a non-Smithian imperfect regime of self-interest maximisation, with a regulatory structure of the public utility described in a framework of the principal-agent relationship. In contrast to the usual neo-classical monolithic representation of principal and agent, we characterise each entity in a Marxian-Kaleckian vein, as a composite set of conflicting sectional interests. This helps us develop a comprehensive perspective of the politico-economic implications of the relationship among the public, government and utility. Based on this generic model, we seek to analyse, in the second part of the paper, the political economy of the power sector in India, with emphasis on Kerala. We also attempt, wherever possible, to estimate the costs of corruption involved in the administration of the power sector.

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    Paper provided by Centre for Development Studies, Trivendrum, India in its series Centre for Development Studies, Trivendrum Working Papers with number 316.

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    Length: 80 pages
    Date of creation: Jun 2001
    Date of revision:
    Handle: RePEc:ind:cdswpp:316
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    1. Jean Tirole, 1985. "Hierarchies and Bureaucracies," Working papers 363, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Brock, William A & Magee, Stephen P, 1978. "The Economics of Special Interest Politics: The Case of the Tariff," American Economic Review, American Economic Association, vol. 68(2), pages 246-50, May.
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    4. Bhagwati, Jagdish N & Srinivasan, T N, 1980. "Revenue Seeking: A Generalization of the Theory of Tariffs," Journal of Political Economy, University of Chicago Press, vol. 88(6), pages 1069-87, December.
    5. Green, Richard, 1999. "The Electricity Contract Market in England and Wales," Journal of Industrial Economics, Wiley Blackwell, vol. 47(1), pages 107-24, March.
    6. Baumol, William J, 1977. "On the Proper Cost Tests for Natural Monopoly in a Multiproduct Industry," American Economic Review, American Economic Association, vol. 67(5), pages 809-22, December.
    7. Laffont, Jean-Jacques, 1988. "Hidden Gaming in Hierarchies: Facts and Models," The Economic Record, The Economic Society of Australia, vol. 64(187), pages 295-306, December.
    8. Holmstrom, Bengt R. & Tirole, Jean, 1989. "The theory of the firm," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 2, pages 61-133 Elsevier.
    9. Mohammad, Sharif & Whalley, John, 1984. "Rent Seeking in India: Its Costs and Policy Significance," Kyklos, Wiley Blackwell, vol. 37(3), pages 387-413.
    10. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
    11. Posner, Richard A, 1975. "The Social Costs of Monopoly and Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 807-27, August.
    12. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    13. Laffont, Jean-Jacques, 1990. "Analysis of Hidden Gaming in a Three-Level Hierarchy," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(2), pages 301-24, Fall.
    14. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
    15. Tollison, Robert D, 1982. "Rent Seeking: A Survey," Kyklos, Wiley Blackwell, vol. 35(4), pages 575-602.
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