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 groups members. Under what circumstances will private organizations provide a stable environment for economic activity? Using original survey data collected from 1,878 randomly sampled traders across 269 markets, 68 market leaders, and 55 government revenue collectors across 57 local governments in Lagos, Nigeria, along with market case studies, I find that strong markets maintain sophisticated institutions to support trade not in the absence of government, but rather as a response to active interference. I argue that market organizations develop and enforce pro-trade institutions when threatened by politicians they perceive as predatory, and when the organization can respond with threats of its own. Under such a balance of power, the organization will not extort because it needs the support of the traders it represents in order to keep threats credible.
About Shelby Grossman
Shelby Grossman is a Postdoctoral Fellow at Stanford Universitys
Center on Democracy, Development, and the Rule of Law. Her research focuses on the political economy of development. In her book project she investigates the conditions under which private organizations will promote economic activity, focusing on market associations in Nigeria. Shelby has additional projects in Nigeria looking at whether reputation affects contracting frictions (with Meredith Startz), and on the politics of non-compliance with polio vaccination (with Jonathan Phillips and Leah Rosenzweig). Shelby earned her PhD in Government from Harvard in 2016 and holds a B.A. from Emory.