Explaining willingness to pay for pricing reforms that improve electricity service in India

Quality of electricity service remains poor in many developing countries. Here we examine factors that influence stated willingness to pay for better service (i.e., more hours of power per day) among rural and urban households in Uttar Pradesh, India. Besides suggesting that low willingness to pay is a major obstacle to pricing reform, we find that respondents with more social trust are willing to pay more. In a randomized survey experiment, we also find that delays in service improvements and a lack of community support for pricing reform reduce willingness to pay. These results confirm the importance of non-financial considerations in popular support for policies that impose higher prices in exchange for better service. However, we do not find evidence for sense of entitlement – the belief that government should offer basic goods and services for free – as a predictor of low willingness to pay. These results offer useful input for effective strategies to reform electricity pricing for better service and, ultimately, economic growth, particularly in areas where electricity is heavily underpriced and where governance is weak.