Understanding the Formal and Informal Divide within Markets in Urban Liberia

• In Event: Subnational Comparative Political Economy

Abstract

Cities across sub-Saharan Africa experience rapidly-expanding markets, which serve as major hubs for economic activity across socio-economic classes. Despite tax and state-building potential, markets remain primarily within the informal economy. We examine marketers in Greater Monrovia, Liberia, where the state has attempted to formally register marketers under the Liberia Marketing Association. We conduct focus groups and administer a survey to answer three questions: (1) why do marketers actively choose to evade formalization (i.e., join the Liberia Marketing Association)? (2) when and why do marketers formalize when they do? (3) what are the effects of formalization on marketers' welfare and economic and political behavior? We embed two experimental components in our survey: (1) a conjoint experiment designed to identify formalization's effects on preferences for communal banking solutions (susu groups); and (2) a series of vignettes that probe the mechanisms that drive the choice to formalize.

Authors

• Shelley Liu, Duke University

• Alice Z Xu, University of Pennsylvania