“Between enforcement and forbearance: deferred compliance and protection against informality during crisis”
SPEAKER: Irene Menendez Gonzalez (IE University)
Informality is a key challenge in many developing countries. We argue that deferring compliance has the potential to protect against informality. Situated between enforcement and forbearance, both well-established concepts in the political economy literature, deferred compliance aims to sustain people’s connections to the formal sector in times of crisis. We emphasize the importance of politics behind deferred compliance and develop a micro-foundational argument to understand the conditions under which the policy may be likely to sustain compliance. Using observational and experimental data, we evaluate the compliance effects of a policy of deferred payment of electricity bills implemented in Uruguay under the Covid 19 crisis. In a difference-in-difference analysis, we compare payment behavior among households that were (and were not) directly affected by a policy of deferred payment of electricity bills in Uruguay under the Covid19 crisis. Using information nudges targeted to beneficiaries, we provide causal evidence of the mechanisms through a RCT implemented in cooperation with the local energy provider. Intent to treat effects indicate a robust increase in payment in response to the information nudges. Our findings show that deferring compliance is an additional strategy through which crisis-hit governments in middle-income countries can protect against informality in ways that are politically and economically viable.
Irene Menendez Gonzalez is an Assistant Professor in International Political Economy at the IE School of Politics, Economics and Global Affairs at IE University in Madrid. Her main research interests lie at the intersection of international and comparative political economy, with special emphasis on the consequences of globalisation for economic and social policy, as well as welfare states and interest representation in Europe and Latin America. She also works on projects analysing the effects of electoral institutions on political representation. Irene obtained her PhD at the University of Oxford in 2015. Before joining IE University, she was an Assistant Professor at the University of Mannheim, a research fellow at the Institute for Advanced Study in Toulouse (2017-2018) and a post-doctoral fellow at the University of Zurich (2014-2017).
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