The Economic Costs of Lopsided Contracts: Evidence from Power Purchase Agreements in Pakistan
Working paper · Pakistan · Energy markets
Abstract
Electricity in many developing economies is procured through long-term bilateral contracts between private generators and state-owned utilities. These power purchase agreements determine a central input cost for the wider economy, yet their terms and performance are rarely observed systematically.
We assemble a new database covering Pakistan’s power purchase agreements since private participation began in the 1990s. We study how contract structure, asymmetric information, and regulatory capture affect tariffs and producer returns, then use a general-equilibrium framework to quantify the consequences for electricity prices and productive misallocation.
Research themes
Contract design · Electricity markets · State capacity · Industrial competitiveness
Current draft available on request — t.dobermann@lse.ac.uk