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: The Roots of a Non-Fiscal Social Contract in Nigeria” pdf; Monkey Cage/Washington Post write up (revise & resubmit)
In the absence of electoral accountability, when can citizens impose their policy preferences on the state? In the standard narrative, the cost of paying taxes motivates citizens to make new demands on the state. We argue that this dynamic of sacrifice is not necessary and even being the beneficiary of a valued service can improve a citizen’s bargaining position. We hypothesize that where coercion is costly and where the state values policy compliance, citizens can strategically use non-compliance to extract other, more highly valued, benefits from the state. These instances represent nascent bargaining processes. Because this non-compliance is unprincipled and successful bargaining is dependent on the state valuing citizens’ compliance, we term this process opportunistic accountability. Drawing on evidence from the polio vaccination campaign in Northern Nigeria, we illustrate a new channel through which policy can empower citizens and initiate a non-fiscal social contract, even in rentier and patronage states.
Shelby Grossman and Dan Honig. “These Are My People: Ethnic and Class-based Discrimination in Lagos” pdf, online appendix (revise & resubmit)
There has been little empirical study of how ethnicity and class interact in shaping economic outcomes. We conduct an audit experiment in Lagos – one of the first audit experiments in Africa – seeking to address this gap. We find no evidence that, all else equal, sharing an ethnicity on its own shapes treatment. However, sharing an ethnicity does benefit higher-class coethnics, giving them immunity from penalties that otherwise apply to higher-class buyers. The pattern of differential treatment suggests taste-based motives play a role in driving seller behavior.
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.