New approaches to studying weakly institutionalized states

I’ve come across the work of Raul Sanchez de la Sierra several times, mostly for his job market paper on state building by armed groups in eastern DRC and the evaluation of a community-driven reconstruction program in the same area (with Macartan Humphreys and Peter van der Windt).  He’s clearly got a good line going in doing extensive data collection in difficult settings, and has started the data collection firm to prove it.  Looking through his other papers recently, I was struck by two more with highly innovative approaches to studying state capacity in weakly institutionalized countries.

The first looks at the effects of introducing state-enforced contracts into informal market relationships which typically operate without them.  The innovation?  He opened his own delivery business in eastern DRC in order to create a new set of relationships between traders and customers, and then varied which customers were asked to sign a contract with consequences for non-payment.  Here’s the abstract:

State capacity has recently become the workhorse of development scholarship. One reason why state capacity matters is that expanding the state legal capacity may increase trade where social institutions cannot govern agency relations (Greif, 1993). However, the state itself may be captured, and thus expanding the state could generate adverse results. Furthermore, the state may crowd-out pre-existing informal mechanisms of contract enforcement. Estimating the impact of the state is challenging, because state formation is endogenous, and because in the absence of a functioning state, there is usually no data. I create a delivery business in the Democratic Republic of the Congo, involving traders and customers who learned to operate without the state, and randomly introduce state contracts. I find that state contracts strongly reduce shirking. However, the results uncover an ethnic bias in contract enforcement by the state: only some ethnic groups can draw on the state’s legal capacity, and customers anticipate this bias. Furthermore, ex-ante, I nd that state contracts, when they are enforceable, and coethnicity are substitutes to solve commitment problems that prevent trade in the presence of agency relations. These results suggest that while social institutions govern some agency relations, they also govern the state administration, therefore distorting the impact of state legal capacity.

A second project is still ongoing, but I’ve heard of some interesting results being discussed around Berkeley development circles.  This is a study with Kristof Titeca on the organization of bribery within the Congolese police force.  From their PEDL application:

The researchers will combine novel data with satellite imagery and traffic data to document the types of contracts determining the sharing of bribes among policemen, as well as their assignments and rotations. They will also collect data on key intersections at which trade from rural areas occurs to investigate the issue of bribery. Additionally, they will estimate the welfare costs of organized bribery to trade, while concurrently analysing the ‘pricing practices’ of police extortion by looking at the police administration as a monopoly with a firm-maximization problem.

By creating this unique dataset on informal taxation, this study can have significant impacts on future policy design that seriously considers corruption and taxation in developing countries and provide a different lens for this pervasive issue. For example, by focusing on individual state officials, most corruption analysis would conclude that a promising intervention would be to provide greater wages to street policemen. However, as this study aims to show (and the previously-funded pilot has shown), such wages would likely be absorbed by the hierarchy as a function of the relative bargaining power of individual policemen within the hierarchy.

In other words, demand for bribes may be driven not only by the income needs of officers on the street, but also by the necessity of passing a large share of any bribes collected up the chain of command.  The working paper addresses this more explicitly.  It doesn’t seem to be available yet, but it’s definitely one to keep an eye out for.

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