The Politics of Order in Informal Markets: Evidence from Lagos
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 is a Postdoctoral Fellow at Stanford University’s Center on Democracy, Development, and the Rule of Law. Her primary research interests are in comparative politics and political economy. Her book manuscript explores the politics of property rights in informal markets in Nigeria. Other research projects include a study on the political economy of diversified business groups, a project on casual inter-group interactions in the informal economy, and a paper on the politics of non-compliance with polio vaccination in northern Nigeria. Shelby received her Ph.D. from the Department of Government at Harvard University in 2016.