Collectivism–Individualism Cultural Cleavage, Local Institutions and Prosocial Behaviour: Evidence From Household Electricity Theft in India

ABSTRACT How does the local sociocultural structure affect prosocial behaviour? The multidisciplinary literature on evolution of prosocial behaviour postulates that the collectivistic societies vis‐à‐vis the individualistic ones witness more prosocial and civic behaviour. Not stealing electricity from public power stations is an example of prosocial behaviour or compliance with formal rules governing public goods. We examine electricity theft as a major incentive issue and a collective‐action and property‐rights problem shaped by monitoring, enforcement, institutional trust and prevailing social norms and afflicting energy consumption in low‐income and developing countries. We study the role of collectivism–individualism cleavages (CIC) as an indicator of local cultural institutions and social structure in explaining electricity theft. CIC is not a difference between inherently prosocial and selfish societies but as a dimension of social structure reflecting interdependence, group orientation and the relative role of informal norms and formal institutions. Analysing a nationally representative household survey dataset, we find that households reporting residence in collectivistic villages or neighbourhoods have a higher predicted probability of reporting illegal electricity consumption than those in individualistic localities. This association holds nationally and across rural and urban samples. Higher local consumption inequality and reported crime incidence are also associated with greater electricity theft, whereas trust in state and local government institutions is significantly related to compliance. The findings suggest that strong local networks may facilitate conformity to prevailing social norms, including norms inconsistent with formal property‐rights rules. Recursive bivariate probit models do not provide sufficient evidence of joint endogeneity. Nevertheless, unobserved community characteristics, selection on compliance preferences and spatial dependence remain potential limitations. The results highlight the importance of property‐rights protection, credible enforcement, institutional trust and alignment between formal rules and informal social norms in inducing prosocial cooperation.