Shelby Grossman and Dan Honig. "Evidence from Lagos on Discrimination across Ethnic and Class Identities in Informal Trade." pdf; replication data (Forthcoming at World Development)
This paper investigates the determinants of price discrimination in the rice market in one neighborhood of Lagos, Nigeria. There has been little empirical study of how ethnicity and class shape economic outcomes in informal market interactions. We conduct an audit experiment – one of the first audit experiments in Africa – seeking to address this gap. We experimentally manipulate class, with confederates presenting as different classes; this may be the first audit study to take this approach. This is also one of the first in-person audits to have multiple transactions for each buyer and seller, thus allowing for the use of buyer and seller fixed effects. We find little evidence that, all else equal, sharing an ethnicity on its own influences market treatment. Class, however, does have substantial effects, at least for non-coethnics. High class non-coethnics receive higher prices per unit than low class non-coethnics. Our findings suggest that the boundaries of group identity appear to be at least partially defined by class in the informal economy.
Shelby Grossman. “The Politics of Order in Informal Markets: Evidence from Lagos” pdf; winner of African Politics Conference Group - African Affairs Best Graduate Student Paper 2015/16 (under review)
Property rights are important for economic exchange, but in much of the world they are not publicly provided. Private market organizations can fill this gap by providing an institutional structure to enforce agreements, but with this power comes the ability to extort from the group’s members. Under what circumstances will private organizations provide a stable environment for economic activity? Using survey data collected from 1,878 randomly sampled traders across 269 markets, 68 market leaders, and 55 government revenue collectors in Lagos, I find that strong markets maintain institutions to support trade not in the absence of government, but rather as a response to active interference. I argue that organizations develop pro-trade institutions when threatened by politicians they perceive as predatory, and when the organization can respond with threats of its own. Under this balance of power, the organization will not extort because it needs trader support to keep threats credible.
Shelby Grossman, Jonathan Phillips, and Leah Rosenzweig. “Opportunistic Accountability: State-Society Bargaining Over Shared Interests” pdf; online appendix; Monkey Cage/Washington Post write up (revise & resubmit)
Conflicting preferences between the state and society underpin most accountability mechanisms by providing a credible way for society to impose costs on the state. Adapting a classic bargaining framework, we argue that broader conditions can support state-society bargaining. Policies that both the state and society value can also enhance society’s negotiating power provided society has a lower valuation and is more patient than the state. By threatening to sabotage their own interests but hurt the impatient state even more, citizens can compel the state to deliver broader policy benefits. We illustrate this logic with the case of polio vaccination in northern Nigeria, where entire communities have resisted the vaccine as a strategy to bargain for more desired services. To resolve and preempt non-compliance, the Nigerian government has enhanced service delivery in other areas, demonstrating the opportunity for improved accountability in the presence of shared-interest policies.
Nathaniel Leff, Jeffry Frieden, and Shelby Grossman. “Trust and Envy: The Political Economy of Business Groups in Developing Countries.” pdf
Diversified business groups play a major role in the economies of many developing countries. Business group members, often from the same communal, ethnic, or tribal group, have or develop inter-personal relations that make it easier to obtain information and monitor compliance related to transactions that require a strong measure of trust. This in-group cohesion facilitates profitable and productive economic activity. However, it can create resentment among other members of society who are barred from membership in a group that is, of necessity, exclusive. This envy can fuel a self-reinforcing cycle of societal hostility and group protectiveness that can deprive society of the economic benefits the groups can provide. There are several possible reactions such as ‘affirmative action’ programs that can slow or stop the cycle of envy and group vulnerability.