About the Talk
Property rights are important for economic exchange, but in much of the world they are not publicly guaranteed. Private market associations can fill this gap by providing an institutional structure to enforce agreements, but with this power comes the ability to extort from group members. Under what circumstances do private associations provide a stable environment for economic activity? Using survey data collected from 1,179 randomly sampled traders across 199 markets in Lagos, I find that markets maintain institutions to support trade not in the absence of government, but rather in response to active government interference.
I argue that associations develop pro-trade institutions when threatened by politicians they perceive to be predatory, and when the organization can respond with threats of its own; the latter is easier when traders are not competing with each other. In order to maintain this balance of power, the association will not extort because it needs trader support to maintain the credibility of its threats to mobilize against predatory politicians.
About the Speaker:
Shelby Grossman joined the Political Science department of Memphis University as an Assistant Professor in 2017. Her research focuses on the political economy of development, with a focus on sub-Saharan Africa. In her book project, which uses original survey data collected in Lagos, Nigeria from 1,878 randomly sampled traders, along with market case studies, she investigates the conditions under which private organizations promote economic activity. She finds that strong markets maintain sophisticated institutions to support trade not in the absence of government, but rather as a response to active state interference. Shelby has additional projects in Nigeria, including one looking at whether reputation affects contracting frictions (with Meredith Startz). She received her Ph.D in political science from Harvard University in 2016.