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Informality, Expectations, and Political Behavior: Evidence from a Developing Democracy
Jessica Gottlieb (Texas A&M University)
You can learn more about Professor Gottlieb by clicking here
Abstract: The majority of economic actors in the developing world participate in the informal sector and yet little is known about the political implications of this increasingly important constituency. I argue that informality conveys important signals that affect beliefs about the government and subsequent political behavior. Introducing these considerations into the politician’s calculus suggests some potentially far-reaching consequences for state capacity-building: namely, the incumbent’s strategic disincentives to encourage firm formalization and increase fiscal capacity. This paper provides evidence in support of key parts of the theory from one empirical context – Senegal, a stable democracy with a relatively weak state. Novel survey evidence illustrates that variation in informality, as measured by how people pay taxes, is associated with lower beliefs about government performance and responsiveness. Experimentally increasing information about a little-known but beneficial fiscal policy change causes informal sector members to positively update beliefs about government performance, which even has consequences for vote choice in a subsequent election. Marrying these quantitative data with evidence from local newspapers and government policies, I additionally demonstrate how low expectations among the informal sector can generate perverse incentives for politicians that may play a role in the persistence of informality in developing democracies.
For more information on the CSDC speaker series, please visit: http://csdc-cecd.ca/events/csdc-speaker-series/
This series is sponsored by the Inter-university Centre for the Study of Democratic Citizenship, which is funded by the Fonds de recherche du Québec – Société et culture (FRQSC).