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DRG LEARNING, EVALUATION, AND RESEARCH (DRG-LER) ACTIVITY

BASELINE REPORTTASKING N030

TAX COLLECTION IN MALAWI

Contract No. GS-10F-0033M/AID-OAA-M-13-00013

June 2018

This publication was produced for review by the United States Agency for InternationalDevelopment. It was prepared by NORC at the University of Chicago, with Lucy Martin, Ph.D. (University of North Carolina at Chapel Hill) and Brigitte Seim (University of North Carolina at Chapel Hill) serving as Principal Investigators. The authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

DRG-LER – GS-10F-0033M/AID-0AA-M-13-00013

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DRG LEARNING, EVALUATION, AND RESEARCH (DRG-LER) ACTIVITY

BASELINE REPORT

TASKING N030

TAX COLLECTION IN MALAWI

JUNE 2018

Prepared under Contract No.: GS-10F-0033M/AID-0AA-M-13-00013

Submitted to:Morgan Holmes

Submitted by:NORC at the University of Chicago

Contractor:NORC at the University of ChicagoAttention: Renee Hendley, Program ManagerBethesda, MD 20814Tel: 301634-9489E-mail: [email protected] authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

mailto:[email protected]


CONTENTSTables.......................................................................................................................... iiFigures........................................................................................................................ iiAcronyms....................................................................................................................1Executive Summary....................................................................................................21. Introduction.........................................................................................................32. Background on the MalawI Context.....................................................................3

2.1 Past Interventions in Tax Collection in Malawi...........................................33. Planned Impact Evaluation..................................................................................4

3.1 Evaluation Design......................................................................................43.2 Evaluation Treatments and Components...................................................4

4. Impact Evaluation Sample...................................................................................84.1 Selection of Districts..................................................................................84.2 Selection of Markets...................................................................................84.3 Treatment Assignment...............................................................................9

5. Baseline Data Collection Strategy.......................................................................95.1 Baseline and Endline Data Collection.......................................................10

6. Key Findings.......................................................................................................106.1 Respondent Characteristics.....................................................................106.2 Vendor Tax Compliance...........................................................................126.3 Vendor Satisfaction with Market Services................................................156.4 Experiences with Tax Collectors...............................................................166.5 Tax Compliance: Subgroup Analyses.......................................................16

7. Conclusions.......................................................................................................18Appendix A: Malawi Background..............................................................................19Appendix B: Intervention Timeline............................................................................23Appendix C: Balance Table.......................................................................................24

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TABLESTable 1 LGAP Impact Evaluation Design.....................................................................4Table 2 Educational Attainment...............................................................................11Table 3 Household Assets.........................................................................................12Table 4 Levels of Trust.............................................................................................12Table 5 Resistance to Paying Taxes.........................................................................14Table 6 Reason for Paying Taxes..............................................................................15Table 7 Perception of Vendor Compliance................................................................15Table 8 Vendor Satisfaction with Government-Provided Market Services................15Table 9 Vendor Tax Compliance by Gender.............................................................17Table 10 Vendor Tax Compliance by Stall Type.......................................................17Table 11 Mean Self-Reported Tax Compliance by District........................................17

FIGURESFigure 1 Intervention Districts....................................................................................9Figure 2 Household Income......................................................................................11Figure 3 Vendor Self-Reported Tax Compliance across Five Days............................13Figure 4 Number of Times Vendor Saw Tax Collector...............................................16

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ACRONYMSCDF Constituency Development FundDAI Development Alternatives IncorporatedDC District CouncilDEC District Executive CommitteeGOM Government of MalawiIFMIS Integrated Financial Management Information SystemIPA Innovations for Poverty ActionJCE Junior Certificate of EducationKW or MK Malawian KwachaLGAP Local Government Accountability and PerformanceMP Members of ParliamentMSCE Malawi School Certificate of EducationPSR Public Sector ReformSMS Short Message ServiceUSAID United States Agency for International DevelopmentWGI The World Bank’s Worldwide Governance Indicators

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EXECUTIVE SUMMARYThis report presents the findings of a baseline survey for a field experiment to be conducted in Malawi on tax compliance in markets. Our proposed experiment will test the effectiveness of two different approaches to improving tax compliance: a bundle of bottom-up interventions that focus on increasing quasi-voluntary tax compliance, and a bundle of top-down interventions that focus on improving the government’s ability to collect taxes and enforce tax compliance. This experiment will be randomized at the market level, across 128 markets in eight districts in Malawi.First, we provide a short discussion regarding relevant attributes of the background and context of Malawi. Following this, we summarize the planned intervention, including our theory of change and evaluation objectives.Next, we summarize data from the baseline survey of 12,389 market vendors across eight districts in Malawi. We begin with basic respondent characteristics, including gender, age, education level, estimated monthly household incomes, and asset ownership. Highlighted findings from this section are as follows: We found that nearly 84 percent of vendors reported being the primary earner in their household. Trust in government was low across vendors – only 22 percent of respondents ranked their district government and ward councilor as “Very trustworthy.” Regarding market services, 48 percent of vendors were very dissatisfied with overall market development.Subsequently, we present descriptive statistics from self-reported tax compliance measures, which are quite high; nearly 59 percent of market vendors report having paid their market fees in full five times in the last five days. To validate these reports, we ask vendors to present receipts from their last tax payment. Results from these questions suggest that most vendors over-report individual tax compliance. Despite very high levels of self-reported payment and receipt compliance, only 27 percent of vendors were able to produce a receipt for their last fee payment when asked by an enumerator.Finally, we present subgroup analyses of individual-level tax compliance across a number of vendor characteristics. These analyses include differences by gender, stall type, market district, and level of political engagement. Tax compliance is slightly higher among women, and among vendors selling goods as opposed to offering services. There is some variation in compliance across districts, which will be further explored in the final analysis of the impact evaluation. The politically engaged (those who reported voting in the last election) had higher rates of tax compliance.These findings suggest that there is significant opportunity to improve in tax compliance across market vendors in Malawi. Our proposed interventions will address concerns at the market vendor and government levels, and aim to improve vendor satisfaction and government revenue collection.

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1. INTRODUCTIONThis report presents findings from a baseline survey conducted by Principal Investigators Lucy Martin and Brigitte Zimmerman at the University of North Carolina at Chapel Hill. This survey provided baseline data collection for a subsequent randomized impact evaluation on tax compliance among market vendors in Malawi. The impact evaluation is one component of a larger USAID project - Local Government Accountability and Performance (LGAP). USAID has developed the LGAP activity to support improved democratic accountability and local government capacity to effectively and efficiently deliver public services, for improved government performance. The aim of LGAP will be to support the Government of Malawi in determining the best ways to improve service delivery and democratic practice. LGAP will focus primarily upon three areas: 1) Supporting citizen engagement and advocacy for accountable local government; 2) Building the capacities of local government to transparently deliver on their mandates; and 3) Supporting decentralization policy and process reforms as required by the Public Sector Reform (PSR) agenda. LGAP will be rolled out over five years,1 will involve a large implementation team, and will cost approximately $15 million. LGAP is implemented by Development Alternatives Inc. (DAI).

2. BACKGROUND ON THE MALAWI CONTEXTThe 2014 UNDP Human Development Report revealed that an estimated 66.7% of the population in Malawi is multi-dimensionally poor, while an additional 25% is near multi-dimensional poverty. Malawi is among the most aid dependent countries in the world with aid representing over 37% of the government’s budget, and an even larger proportion of overall development spending. The World Bank’s Worldwide Governance Indicators (WGI) shows that Government Effectiveness in Malawi has declined from an already poor ranking of the 42nd percentile in 2010 to the 34th percentile in 2013. In brief, improving the delivery of public services and increasing local revenue collection could be impactful for Malawi's economic and political development. Additional details concerning local government and revenue collection in Malawi are included in Appendix A.

2.1 PAST INTERVENTIONS IN TAX COLLECTION IN MALAWIDespite the importance of own-source revenue from districts, our fieldwork suggests that very few interventions have been designed expressly to improve tax compliance in markets. However, we did learn of one high-achieving District Revenue Manager who attempted to increase tax compliance in the markets in his district through commission pay and “pep talks.'' Despite the short-term and unstructured nature of his efforts, he appears to have succeeded in increasing tax

1 See Appendix B for a timeline of the impact evaluation.

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compliance among market vendors significantly. This suggests that there is significant potential for improvement.

3. PLANNED IMPACT EVALUATION3.1 EVALUATION DESIGN The barriers to tax compliance in Malawian markets line up with two main theories of tax compliance: governments can increase revenue collection either by increasing the costs of tax evasion - typically by improving government capacity - or by increasing citizens’ willingness to pay taxes quasi-voluntarily. The LGAP impact evaluation is a 2x2 factorial experiment consisting of two cross-cutting treatment arms to be randomized at the market level. One arm is designed to increase quasi-voluntary compliance by market vendors; the other is designed to improve government capacity to collect taxes efficiently. Table 1, LGAP Impact Evaluation Design shows design and group sizes; the sample is also discussed in Section 4.2.Table 1 LGAP Impact Evaluation Design

Each treatment arm has several components, outlined below. The decision to “bundle" treatments in this manner was made for two reasons. First, the lack of clear evidence on effective methods for increasing tax collection makes it important to provide a strong test of each potential mechanism. Thus, if the bundle of bottom-up treatments below is implemented correctly and yet there is no increase in tax compliance, it suggests that bottom-up strategies may simply not be effective in this context. Unbundling would require choosing one component for the intervention; if it failed, it would not be clear whether this was because the overall approach is ineffective, or whether the treatment was simply too weak. Second, our qualitative fieldwork suggests that each approach (top-down and bottom-up) will only be successful if it solves multiple problems simultaneously. For example, focus groups with vendors strongly suggest that it will be very difficult to increase quasi-voluntary compliance through the bottom-up treatments without each step.

3.2 EVALUATION TREATMENTS AND COMPONENTS

3.2.1 Bottom-Up TreatmentsThe first intervention bundle is designed to increase vendors’ willingness to pay market taxes voluntarily. Above we identified three key reasons for low compliance: vendors feel that they receive little in return, especially with regards to market

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services; they do not see the government as accountable to vendors (citizens) and therefore do not trust it to provide market services in the absence of stronger accountability; and they feel excluded from the tax system's structure. To address these barriers, the bottom-up treatment is a four-component intervention. Markets assigned to receive the bottom-up treatment receive all of the components described below (except for Step 1: Facilitating Market Committee Elections, which only markets without valid market committees receive). Our pilot research with vendors suggests that each component is unlikely to have a large impact on its own: the intervention needs to identify problems through the meetings, provide a costly signal of government commitment through the construction grants, and then improve transparency to sustain any positive changes, and to empower vendors to monitor and sanction local officials for how they use market revenues.Step 1: Facilitate Market Committee Elections Market committees, comprised of vendors in each market, play a critical role in solving market problems and liaising between market vendors and local government. However, not all markets in the bottom-up and bottom-up + top-down treatment groups have valid market committees. Invalid market committees are those that were formed without following council approved procedures – such as committees that were directly imposed on markets by the government – or whose terms have expired. As these market committees should serve to represent the market vendors’ interests and interact with the government, it is important that vendors see these committees as legitimate extensions of their own interests. As such, new elections will be held in markets that do not have valid market committees. Newly elected market committees will receive training that will instruct committee members on the proper organizational structure for the committee and emphasize the roles and responsibilities of the market committees. These trainings, co-run by the District Councils' District Capacity Building staff and LGAP district staff, will underscore that regulations governing committees are government-sanctioned, to increase their validity and to signal to committee members that they themselves are legitimate actors in the governing structure. As the market committees will play key roles in some of the other bottom-up interventions, vendors must be able to see them as an interface between them and the government.Step 2: Facilitate Meetings between Vendors, Market Committees, and Local Government After ensuring that each treatment market has a valid market committee, public meetings to address vendors’ perceived exclusion from the taxation system will be facilitated in treatment markets between vendors, market vendors' committees, and local government. The latter group includes tax collectors, the market/zone managers, the local ward councilor, and group village headmen. These meetings will be observed by the LGAP district coordinator and will do the following:

Discuss perceived problems with the current tax collection system. Discuss the roles and responsibilities of vendors and government officials,

including vendors' obligation to pay market fees whether or not they sold any goods and government's obligation – mandated by law – to spend 25% of market revenues on market upkeep.

Explain the bottom-up intervention and the way it will impact market operations. This includes discussing the way the council uses funds from

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market fees and introducing the mHub SMS Market Revenue Reporting and Grievance Reporting systems. Vendors will sign up for the SMS system at the meeting, and will have the opportunity to continue signing up throughout the intervention timeframe.

Document and discuss the state of market services, including toilets, sanitation, security, and infrastructure. Vendors will have the opportunity to develop a list of priorities – from an approved list of infrastructure project types – for how the government should upgrade market infrastructure.

This piece of the intervention resembles the classic case of tax bargaining, in which governments make policy concessions to vendors in return for tax revenues. We anticipate that this part of the intervention will increase citizens’ sense that they have a say in how markets are run, alleviating the sense of exclusion that leads to low tax compliance. It may also increase trust in local officials, especially if vendors view these meetings as “good faith gestures'' from local government. In our interviews, market vendors in markets that had been visited by higher-up government officials always remembered and appreciated it. Finally, vendors will receive information about how revenues are used and will be informed of the government's legal obligation to spend a fixed percentage of market revenues on market upkeep.Step 3: Jump Start Service Delivery in Markets The meetings in Step 2 will be ineffective if vendors do not subsequently see improvements in services. Our scoping research indicates that increased revenues should be sufficient to maintain better services once infrastructure investments are made.2 However, the condition of services in many markets at this point is so poor that even drastically improved tax compliance would be insufficient to fund necessary infrastructure improvements; low tax compliance leaves local government without funds for improvements, but citizens refuse to pay until services improve. This suggests the need to “jump-start'' the taxes-services loop by funding infrastructure improvements. The initial meetings in Step 2 will generate a list of priorities in each market. With significant oversight and monitoring from LGAP, local government will be given a grant to be used in each market. These grants will be used for the infrastructure projects that were prioritized by citizens. These grants will be small (up to $5,000 of infrastructure projects), and therefore will not be sufficient to completely rehabilitate markets. They should, however, be sufficient for small-scale infrastructure improvements such as building a set of roofed stalls or building a garbage station. After a competitive bidding process leads to the selection of the appropriate construction firms, construction will be bookended by an opening ceremony and a handover ceremony, attended by government officials and vendors. Market committees will be responsible for monitoring the state of the projects, and, upon their completion, will develop a maintenance plan in conjunction with the district council. We anticipate that this part of the intervention will serve as a costly signal of the government’s commitment to improving service provision in markets.

2 For example, we estimate that 10 days of fees from 10 vendors would cover the cost of a month of periodic trash pickup across several markets in an area, and that 25 days of fees from 10 vendors would cover the cost of a security guard for one market.

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Step 4: Increase Transparency in the Taxation System via SMS Revenue Reporting and Grievance Reporting SystemsIf local governments build new market infrastructure, but fail to maintain market services by providing ongoing sanitation and security services, tax compliance is unlikely to increase. As part of Step 2, vendors will be informed of the government’s legal obligation to spend a fixed percentage of market revenues on market upkeep. To strengthen citizens’ trust that their tax funds are being used well, and to facilitate bottom-up accountability between vendors and local government, citizens must also have information about government revenue and spending on an ongoing basis; a one-off meeting is unlikely to yield long-term gains. To improve citizens’ access to information, we will implement an SMS messaging system designed to keep citizens informed about revenue collection and corresponding government spending on a monthly basis. This system will be developed and managed by mHub. At the meetings in Step 2, vendors will be encouraged to sign up for the SMS service. Each subsequent month, vendors will receive a message with the amount of revenues the government raised from the market in the previous month, along with information on how the revenue was used for service provision. One of the main advantages of the SMS system is that, once data on market revenues have been collected, the system for passing information to vendors is centrally managed.In addition to obtaining information on market revenues, vendors will be able to use a related SMS system, also set up and managed by mHub, to report complaints and grievances about local government service delivery. Vendors will be trained on how to use this system in the meetings in Step 2, and markets will be given materials to explain the system's use. Grievances are passed on to ward councilors, and mHub will follow up with complainants when issues have been resolved.This component of the bottom-up intervention is designed to improve transparency and information regarding how revenues are used. If revenues are being used well, this should help to sustain high quasi-voluntary tax compliance by vendors. If, however, funds are not being used well, it may have the opposite effect. The grievance system is designed to give vendors more agency and enable them to make sure that revenues are used well.Collectively, the four steps in the bottom-up intervention have the potential to significantly improve vendors’ willingness to pay taxes. Overall, the intervention has the potential to increase tax revenues; improve market services; increase vendor satisfaction with local governments; and empower vendors to hold officials accountable for how funds are spent. Increases in market services may have additional benefits for vendors, including attracting more customers, increasing profits, and improving public health in and around markets.

3.2.2 Top-Down TreatmentsThe second treatment arm is designed to improve district governments’ capacity to collect taxes. We identified three (broad) barriers to collection: inefficient collection systems; lack of incentives for tax collectors to work hard; and lack of market monitoring.3 All markets assigned to receive the top-down treatment will receive the 3 See Appendix A for a more detailed description of the barriers to tax collection in Malawi.

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following four components. As with the bottom-up treatment arm, the components in the top-down treatment arm complement each other; we believe they are individually necessary and collectively sufficient to increase revenue collection.Step 1: Roll Out Mobile-Based Market Fee Payment System

To address the widespread potential for evasion, corruption, and inefficiency at the market level, markets in the top-down condition will shift to paying market fees via mobile technology. Airtel Malawi will be engaged to collect fees on behalf of the district council. Tax collectors will collect fees from vendors and then give the money to the market manager, who will be responsible for transferring the money to the Airtel agent responsible for the market. The money will then be transferred to the district council bank accounts. Airtel will earn 2% of the fees as payment. Besides making payment of fees and their transfer to the district governments much more regulated and straightforward, this system allows the government to track reliably how much each market pays in fees.Step 2: Provide Accurate and Reliable Market Vendor Counts One barrier to efficiently collecting market fees is the lack of a reliable estimate of anticipated revenue, which is required to determine collector benchmarks, monitor collector performance, and forecast local government revenue. The size of the market (measured in the number of vendors) changes over the course of the week, month, and year. Because of this, a formal registration system seems cumbersome and likely to either marginalize irregular vendors or place an undue burden on them. Nevertheless, market size estimates are necessary to generate revenue targets and forecast revenue. To address this issue, LGAP will hire and train vendor counters (who cannot be market vendors or government staff). Counters will randomly – to avoid collusion that may artificially inflate or deflate vendor counts – visit each market four times a month – twice each on a market day and on a non-market day (i.e., unofficial market day). These vendor counters will use the "walk-around" method – systematically walking through the market and recording the number of vendors by type of business. On each visit, they will count vendors at multiple points throughout the day, in order to obtain a more accurate count. Step 3: Forecast Revenue and Generate Revenue Targets Based on Vendor Numbers The figures produced in Step 2 will be used to determine collector compensation schemes, forecast local government revenue, and track LGAP performance. The counts, once transferred to the government, will be fed into a revenue target calculator that adjusts targets based on seasonal conditions in order to create monthly estimates of the expected revenue for each market. These targets will then be communicated to market masters and revenue collectors. Producing these revenue estimates serves multiple purposes. First, it allows local governments to know how much revenue to expect. Second, it provides a way to evaluate the performance of a market, both in terms of vendors' tax compliance and tax collectors' ability to collect fees. Finally, for the latter group, it provides a check against corruption and serves as an incentive for better performance.Step 4: Introduce Incentives for Tax Collectors Under the current system, tax collectors lack incentives to enforce revenue collection. In many markets, tax collectors receive a fixed wage, with no incentives

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based on the revenues raised. Tax collectors are paid less than $1 a day, and in vendor focus groups, vendors frequently noted that they believed that collectors were driven to bribery out of desperation and a need for supplementary income. Many tax collectors detailed the additional effort required to fully enforce tax compliance and punish the non-compliers; they hinted that they were possibly not as motivated as they could be, since their income was entirely independent of the revenue they collected.To address these issues, we will implement a bonus-type incentive system using the revenue targets created in Step 3. These incentives will be non-monetary in nature and will apply on two levels: market and individual. If a market meets or surpasses its monthly revenue target, the market team will receive either wheelbarrows, rakes, hoes, or shovels, valuable supplies that make management of the market easier. In addition, if the market meets its target, each tax collector will also receive an individual incentive, which may be a bicycle, fertilizer, certificate of excellence, mattresses, and work suites. A tax collector whose market keeps meeting its targets will be able to choose to alternate prizes. These incentives should inspire tax collectors to perform their jobs without having to resort to bribery.

4. IMPACT EVALUATION SAMPLE4.1 SELECTION OF DISTRICTSLGAP will be conducted in 8 districts in Malawi: (1) M’Mbelwa, (2) Kasungu, (3) Machinga, (4) Balaka, (5) Blantyre, (6) Zomba, (7) Mulanje, and (8) Lilongwe (shown in Figure 1, overleaf). These districts were chosen by the implementing partner responsible for LGAP; all districts are either USAID target districts, or districts chosen by the Government of Malawi (GOM) as the pilot districts for the next round of decentralization. The districts are shown on a map in Figure 1 (overleaf), Intervention Districts.

4.2 SELECTION OF MARKETSIn May 2017, LGAP conducted a market listing and mapping exercise in the eight sample districts. First, LGAP employees spoke to district officials and locals, allowing them to identify all markets in these districts. Using this information, LGAP visited each market, and created a market databank, which includes information at the market level on market days, number of vendors, and market characteristics and conditions.

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Figure 1 Intervention Districts

NOTE: Main and Field offices refer to the offices of the USAID implementing partner responsible for LGAP

We used this information to select 128 markets to participate in the impact evaluation. The selection of markets was not random. We first chose markets that had at least one market day a week and that had at least 100 vendors on market days (i.e., the largest markets).4 The number of markets selected in each district is not the same, as there were more markets in some districts than in others. We also dropped markets that did not sell the three most popular goods.

4.3 TREATMENT ASSIGNMENTFor treatment assignment, we followed the recommendations of Imbens (2011) and used stratified (block) random assignment. We stratified on district and the baseline level of tax compliance to create four groups of 32 markets each. We stratified on the baseline level of tax compliance in order to eliminate baseline differences in the potential for intervention effectiveness and reduce the potential for unobserved factors to affect the results.

4 The design requires three treatment groups (bottom-up, top-down, and bottom-up + top-down) and a control group. This means we had to ensure that each district had a number of markets that was divisible by four. Because of this constraint, not all markets in the sample have at least 100 vendors on a market day. In these cases, we randomly selected smaller markets, stratifying on latitude.

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5. BASELINE DATA COLLECTION STRATEGYOur key outcome measures are derived from individual-level surveys and government data. We will implement baseline and endline surveys to collect individual-level data from market vendors which we will analyze at the individual level as well as aggregate to the market level to analyze market-level outcomes.

5.1 BASELINE AND ENDLINE DATA COLLECTION

5.1.1 Market Vendors SurveyThe primary instrument for baseline and endline data collection in the impact evaluation is a survey of market vendors. Between July and September 2017 (1-3 months prior to the planned intervention rollout), 100 vendors were surveyed in each of the 128 markets. Eighty of these vendors were given a “short'' (5-minute) version of the survey that primarily measures tax compliance and a handful of demographic variables. The remaining 20 respondents in each market received a “long'' (1-hour) version of the survey that includes more detailed data collection on demographics, economic, political, and social variables, and tax perceptions and payments. Vendors were selected using a random walk, with starting points determined using the market maps developed in the marking listing/mapping exercise described above. Vendors received a small airtime voucher in return for completing the survey (MK400 for the short survey and MK600 for the long survey). With some attrition and challenges in sampling in particular markets or on particular days, across eight districts 12,389 vendors completed the survey.

6. KEY FINDINGSThis section presents the central findings from the baseline market vendors survey. We organize our findings into five sub-sections: (a) descriptive characteristics of respondents; (b) current levels of vendor tax compliance; (c) current levels of vendor satisfaction with market services; (d) current levels of vendor experiences with tax collectors; (e) covariates of tax payment across vendors.

6.1 RESPONDENT CHARACTERISTICS

6.1.1 Respondent GenderOf the 12,389 market vendors surveyed, approximately 66 percent are male. Slightly more than 65 percent of vendors selling goods are male, and slightly more than 75 percent of vendors offering services are male. Only 48 respondents both sell goods and offer services.

6.1.2 Respondent AgeThe average age of respondents in the sample is 33 years, and ranges from 18 to 87. Female respondents are slightly older, with an average age of 34.1 years of age



compared to 33.4 years of age for male respondents.

6.1.3 Respondent EducationThe vast majority of respondents have received some level of formal education. Table 2, Educational Attainment (overleaf) shows that 63% of respondents have completed, at a minimum, primary education (up to Standard 8); approximately 28% of respondents either have some secondary school or completed secondary school (MSCE/Form 4). Only 1.44% of respondents completed post-secondary education – whether in the form of a technical or private college, or a degree-granting program. The average male in our sample holds slightly more than half a year of education more than the average female (0.62 school years).Table 2 Educational Attainment5

Level of Education Men (%) Women (%) Total (%)None 52 48 4Nursery School 28.6 71 4Standard 1 to Standard 8 65 34 55Form 1 65 35 7JCE/Form 2 67 33 8Form 3 70 30 9MSCE/Form 4 75 29 11Technical/Private College 69 31 <2Degree 78 22 <1Total 66.6 33.4 100

6.1.4 Respondent Household Income Nearly 84 percent of vendors reported being the primary earner in their household. Vendors also self-reported monthly household income data. The mean reported monthly household income is approximately 75,000 Malawian Kwacha (about US$100). There is significant variation in income across vendors, however. Figure 2, Household Income, presents the full income distribution.

5 Percentages may not sum to 100 due to rounding



Figure 2 Household Income

6.1.5 Respondent Household Assets Asset ownership among market vendors is summarized in Table 3, Household Assets. Of note, 80 percent of respondents own a basic cell phone, and 23 percent of respondents own a smart phone. High rates of cell phone ownership suggest significant potential for take-up of the interventions that employ SMS communication with vendors. Many vendors also report owning farmland (68 percent of respondents) and bicycles (65 percent of respondents).Table 3 Household Assets

% with Asset Mean Number of Asset Owned

Houses 76 1.6Farmland (acres) 68 2.8Undeveloped Plots (acres) 15 2.8Bicycles 65 1.45Chickens 51 9.6Goats 27 4.3Pigs and Cows 13 4.6Motorcycles and Cars 9 1.2Computers 4 1.2Basic Cell Phones 80 1.6Smart Phones 23 1.5Refrigerators 9 1.3



6.1.6 Respondents’ Trust in GovernmentTo better understand attitudes within the target population, the survey asked respondents a series of questions asking them to judge the level of trustworthiness of different levels of government and groups of individuals. Data are summarized in Table 4, Levels of Trust. Vendors report high levels of trust in other people in their respective market, and in Malawians in general. Respondents report comparatively lower levels of trust in their district governments and in their ward councilors. Across both levels of government, only 22 percent of respondents found them to be “Very trustworthy.” Table 4 Levels of Trust

District Government

(%)Ward

Councilor (%)People in this

Market (%)Malawians in General (%)

Very trustworthy 22 22 43 28

Somewhat trustworthy 42 39 46 47

Not very trustworthy 23 24 9 17

Not at all trustworthy 12 15 2 8

6.2 VENDOR TAX COMPLIANCEAs was discussed earlier in this report, it is difficult to find a valid measure of tax compliance among market vendors, due to the reluctance of many people to admit that they do not always pay the required fee. We use a self-reported measure and a behavioral measure.

6.2.1 Vendor Fee PaymentAs part of the survey, enumerators asked market vendors to allocate five tokens across three categories representing the last 5 days they sold in the market: the days they pay the full fee, the days they pay something but less than the full fee, and the days they do not pay the fee. The full distribution of responses is presented in Figure 3, Vendor Self-Reported Tax Compliance across Five Days. Nearly 60 percent of market vendors report having paid their market fees in full five times in the last five days. The remaining 40 percent split evenly across the remaining answer options: paying four out of five days; three out of five days; two out of five days; one out of five days; or none of the five days.



Figure 3 Vendor Self-Reported Tax Compliance across Five Days

Tax compliance is a sensitive issue, and vendors may be more willing to provide truthful answers when the question of tax compliance is asked in a more indirect fashion. To test this, vendors participated in a list experiment as part of the survey. All vendors were provided with a list of items that people sometimes spend money on. Each vendor was asked to tell the enumerator only the number of these items that they had spent money on in the past week – that is, they did not report which items they bought. Among vendors in the control group, the items on the list were: (1) kerosene, (2) new clothes, (3) batteries, and (4) airtime. Vendors in the treatment group were presented with an additional list item: market fees. The order of the items in each list was randomized across respondents to minimize order effects. Assuming that vendors in the two groups have similar spending patterns on the items listed (a reasonable assumption with random assignment to the groups), the difference in means across the groups can be interpreted as the proportion of vendors across the entire population who pay their market fees. Among control group vendors, the mean reported number of items was 1.8. Among treatment group vendors, this mean was 2.4. This difference in means is significant at the 1% level (p-value of 0.00). Therefore, we can conclude that 60% of vendors pay their market fees at least once per week.6.2.2 Vendors & Market Fee

ReceiptsAll vendors are supposed to receive an individual receipt each time they pay their market fees. When asked, “The last time you paid market fees in this market, did you get a receipt for paying?” 92 percent of vendors responded that they did receive an individual receipt. Less than three percent of respondents reported being given a shared receipt; less than 1 percent did not receive a receipt and did ask for one; and slightly less than five percent of respondents did not receive a receipt and did ask for one. Despite very high levels of self-reported payment and receipt compliance, only 27 percent of respondents were able to produce a receipt for their last fee payment when asked by an enumerator. This disparity suggests that either (a) vendors over-report the frequency with which they pay their fees in full; (b) tax



collectors are not issuing receipts; (c) vendors are not keeping their receipts as they should be or (d) a combination of these factors.

6.2.3 Vendor Tax MoraleTo estimate the level of tax morale across vendors, respondents were read two statements and asked to choose one with which they agreed with more. The first statement read, “Vendors should always pay tax even if they disagree with local government.” The second statement read, “Vendors should only pay tax if they agree with local government.” Responses were nearly evenly split across both statements. Forty-six percent of respondents more strongly agreed that vendors should always pay tax, even if they disagree with local government. A majority (54 percent) agreed more strongly with the opposite statement; that vendors should always pay, even if they disagree with government. The order in which vendors saw each statement was randomized, and the order in which they saw the statements did not make a difference in their response.

6.2.4 Perceptions of Tax EvasionDuring the survey, vendors were asked to rate their level of agreement with the following statement: “If I wanted, I could refuse to pay the market fee.” Results are summarized in Table 5, Resistance to Paying Taxes. These results suggest that most vendors believe they would be compelled to pay their fees, even if they did not want to.Table 5 Resistance to Paying Taxes

Number of Vendors PercentStrongly Disagree 1,964 79Somewhat Disagree 144 6Somewhat Agree 112 4Strong Agree 280 11

Vendors were also asked about why they pay their market fees. Each vendor was asked to rank their level of agreement with the following statements: (1) I pay market fees because it’s the right thing to do; (2) I pay market fees because I’ll get in trouble if I don’t; (3) I pay market fees because I get developments in the community provided by the district government. Across the first two statements, 92 and 86 percent of respondents, respectively, “strongly agreed” with these statements. Opinions on the third statement were mixed. While 24 percent of vendors “strongly disagreed,” 43 percent of vendors “strongly agreed,” and a further 25 percent of vendors “Somewhat agreed.”Finally, vendors were asked which of the three reasons (listed above) most impact them in terms of whether they pay their market fees. Results are summarized in Table 6, Reason for Paying Taxes (overleaf). Interestingly, most respondents (74 percent) report that intrinsic motivation is the primary driver of tax compliance. A relatively low percentage of respondents (7 percent) see market and community developments as a driver of tax compliance. Currently, from a vendor perspective, there is clearly a weak link between tax compliance and market services. This



suggests that delivering tangible development to market vendors has the potential to increase tax compliance.Table 6 Reason for Paying Taxes

Percent of VendorsI pay market fees because it’s the right thing to do 74

I pay market fees because I’ll get in trouble if I don’t 18

I pay market fees because I get developments in the community provided by the district government

7

To measure vendors’ perception of tax evasion, each respondent was presented with 10 tokens. These tokens represented all the vendors in a given market. Respondents then separated these tokens into three piles to indicate how frequently they believe other vendors pay their market fees. Table 7, Perception of Vendor Compliance, summarizes the mean number of tokens in each group, according to respondent selections. Overall, vendors perceive that more than half of their peers pay fees daily. These general perceptions seem aligned with the previously reported compliance measures; most vendors pay their fees often, but many vendors pay infrequently.Table 7 Perception of Vendor Compliance

Percent of VendorsVendors who pay their fee every day they sell in the market 63

Vendors who pay their fee sometimes but not always 16

Vendors who never pay their fees 9Unaccounted for vendors 12a

a Despite asking respondents to allocate all 10 tokens to one of the categories, some did not do so, so the allocated percentages do not sum to 100%.

6.3 VENDOR SATISFACTION WITH MARKET SERVICESThe survey asked vendors about their overall level of satisfaction with government services in the market in which they work. Table 8, Vendor Satisfaction with Government-Provided Market Services, summarizes the responses. Almost half (48 percent) of vendors report being “very dissatisfied.” Less than 15 percent of vendors report being “very satisfied.” High levels of dissatisfaction are common across markets in all districts. Vendors were also asked to rank their level of satisfaction with a number of market services. These included access to clean water, market toilets, garbage collection, the condition of market pathways, the condition of market stalls, and security. Vendor satisfaction was highest with market toilets. Satisfaction was lowest with the level of security in markets. When disaggregated by service, levels of satisfaction with particular services mirror levels of satisfaction with services in aggregate.



Table 8 Vendor Satisfaction with Government-Provided Market ServicesNumber of Vendors Percent

Don’t Know 36 <1Refused to Answer 13 <1Very Satisfied 1,793 14Somewhat Satisfied 2,977 24Somewhat Dissatisfied 1,577 13Very Dissatisfied 5,993 48

6.4 EXPERIENCES WITH TAX COLLECTORSVendors were also asked about their interactions with tax collectors. Figure 4, Number of Times Vendor Saw Tax Collector, presents the full distribution. The overwhelming majority – 83 percent of vendors – reports seeing (though not necessarily interacting with or paying fees to) a fee collector in the market five times in the past five days. Figure 4 Number of Times Vendor Saw Tax Collector

Most vendors have a mostly positive view of the fee collectors in their market. Sixty-three percent of vendors “strongly agree” that fee collectors in their market are polite and treat vendors well. However, approximately 40 percent of vendors report that fee collectors in their market are “very honest.” When asked to rate their overall relationship with fee collectors in their market, approximately 45 percent of vendors respond with “very good.” These responses suggest that vendor relationships with fee collectors differ both across vendors and across dimensions of the vendor/collector relationship.



6.5 TAX COMPLIANCE: SUBGROUP ANALYSES

6.5.1 Differences across GendersTable 9, Vendor Tax Compliance by Gender (overleaf), presents self-reported tax compliance by gender. There does not seem to be a significant difference in self-reported tax compliance across male and female vendors. Both male and female vendors report paying market fees in full for nearly four of the past five days. Interestingly, there is a statistically significant difference across genders when vendors are asked if they can produce a receipt for the last time they paid their market fees. Overall, only 27 percent of vendors were able to produce such a receipt. Among male vendors, this number falls to 25 percent, whereas 32 percent of female vendors could produce a receipt. This may suggest that bias in self-reported tax compliance differs across genders. It could also indicate that tax collectors issue receipts to male and female vendors at different rates, or that women are more likely to keep their receipts.Table 9 Vendor Tax Compliance by Gender

Gender Number of Vendors Mean (Days Paid in Full)

Respondents Able to Present Past Receipt

(%)Male 8,234 3.79 25Female 4,126 3.83 32

6.5.2 Differences across Business TypesTable 10, Vendor Tax Compliance by Business Type, presents self-reported tax compliance, disaggregated by business type. Among respondents, 90 percent of vendors sell goods in the stall that they operate. Ten percent of respondents offer services in the stall that they operate. A very small minority (48 vendors in total – less than one percent of the sample) operate stalls that both sell goods and offer services. Vendors that sell goods report paying their market fees in full for an average of 3.87 days out of the past five. This is much higher than those vendors offering both goods and services, as these vendors report paying their fees in full for less than 3 of the past five days. These differences are statistically significant. The ability to produce a receipt from the last time they paid their fees varies substantively less by business type, but is still a statistically significant difference. Overall, vendors that only sell goods (and do not offer services) report paying their fees in full more frequently and are most frequently able to produce a receipt for these payments.Table 10 Vendor Tax Compliance by Business Type

Measure Sells Goods OnlySells

Services Only

Sells Goods and Services

Mean Reported Days Paid in Full (of 5)

3.87 3.20 2.96

Can Produce Receipt (%) 28 23 25



6.5.3 Differences across DistrictsTable 11, Mean Self-Reported Tax Compliance by District, presents tax compliance by district. Across districts, vendors report different levels of tax compliance. In Machinga, Mulanje, and Lilongwe districts, vendors self-report paying their market fees in full for approximately four of the last five days. In other districts, including Zomba and Kasungu, the mean number of days hovers around 3.5.Table 71 Mean Self-Reported Tax Compliance by District

Market DistrictMean Number of Days Paid in

Full(Of Five)

Number of Vendor Responses

Machinga 4.09 799Mulanje 4.03 1,958Lilongwe 4.02 1,601Blantyre 3.89 780M’mbelwa 3.86 2,387Balaka 3.81 1,046Zomba 3.56 1,587Kasungu 3.45 2,202

6.5.4 Differences by Political EngagementThe overwhelming majority of respondents (88%) were registered to vote in the last presidential election, which took place in 2014.6 Among all respondents, 84% voted in the last presidential election. There is no significant difference in self-reported tax compliance by voting history. That is, vendors who voted do not, on average, report higher levels of tax payment than those who did not vote. However, vendors that reported voting are more likely to present a receipt from their last tax payment than non-voting vendors. Vendors that voted had receipts available nearly 27 percent of the time, whereas vendors that did not vote had receipts available less than 21 percent of the time. This difference suggests political engagement may be related to tax compliance.

7. CONCLUSIONSTaken together, these baseline data suggest relatively moderate levels of self-reported tax compliance in markets across Malawi and relatively low levels of validated, behavioral tax compliance. This suggests LGAP has the potential to increase tax compliance by a substantial margin. As we move forward with the full impact evaluation analysis, we highlight several critical next steps:■ First, the variation in vendor demographics will allow us to analyse how each

intervention affects different groups of individuals. In particular, our baseline findings suggest that vendors of different genders may have different propensities towards tax compliance.

6 Given that official election statistics report slightly lower turnout (~70 percent), this figure may be due to over-reporting by market vendors.



■ Second, there are low levels of trust in government and perception of honesty among government officials (tax collectors) among vendors at baseline. Bottom-up interventions have the potential to increase trust and perceptions of tax collectors, subsequently improving tax compliance.

■ Third, the data show that vendor satisfaction with market services is extremely low. This holds across districts. Small improvements in market services may therefore have a significant effect on vendor satisfaction, and in turn, vendor tax compliance.

■ Finally, the baseline data suggest a link between political engagement and tax compliance, which aligns with the findings of Principal Investigator Lucy Martin’s previous work. We aim to explore this link more extensively in the full impact evaluation analysis.

In sum, the data suggest significant potential for the proposed interventions to change vendor attitudes regarding tax collection and vendor propensity for quasi-voluntary tax compliance.



APPENDIX A: MALAWI BACKGROUNDLOCAL GOVERNMENT IN MALAWIThe Malawi government developed the National Decentralization Policy and passed the Local Government Act in 1998. The Policy and related laws devolve administrative, fiscal, and political power and authority to local government for service delivery as well as empower citizens to become involved in development decisions and implementation of development projects. While some decentralization activities seem promising, progress in the implementation of decentralization has been slow. Decentralization has been rolled out in a disjointed fashion over the last 16 years, with fiscal decentralization lagging far behind administrative and political decentralization. This means that local government has significant authority over development in Malawi but is entirely reliant on central government to fund it, and the funds received are completely insufficient to address local needs. In a series of interviews conducted in 2015 and 2016, local government officials indicated that this lack of fiscal autonomy creates a sense of dependency and a barrier to accountability. While local governments continue to seek increased fiscal transfers, they are also able to raise local revenue via market fees, business licenses, property taxes and other fees. Own-source revenues currently make up a small percentage of rural districts’ budgets, but it is widely acknowledged that tax collection and administration could be expanded and improved, providing the local governments with badly needed revenue.Malawi has three levels of elected government: councilors are elected in single-member wards to serve on district councils; members of parliament are elected in single-member constituencies to serve on parliament; and the president is elected at the national level. District government, which is the lowest level of government, forms the basis for this project. The elected District Council consists of representatives from each ward, and is advised by appointed officials from the ministries. After the Local Government Act created the position of elected ward councilor within Malawi’s district government, the first local government elections were held in 2000. These officials served until 2005, when the next local government elections were cancelled by then-President Bingu wa Mutharika. From 2005 to 2014, elected local government did not exist. Local government consisted entirely of appointed government officials, selected by the ruling party. Each district’s appointed local government officials were led by an appointed District Commissioner. During this period, the appointed officials took on many of the roles and responsibilities given in the constitution to elected officials. The Local Government Act was revised in 2010, with widespread demand to reinstate elected councilors as part of the revisions. Local government elections were held in May 2014, and 462 ward councilors were elected in single-member wards within the 28 District Councils and 7 City Councils across the country.While the election of local councilors in 2014 provides a renewed opportunity to strengthen local governance, it also has affected the power structures that developed in their absence, creating an institutionally complex environment. In the



absence of councilors, Members of Parliament (MPs) stepped in to provide representation at the local level and now are not keen to have that authority challenged, especially recognizing that their reelection often stems from the delivery of local development projects, most often accomplished through the Constituency Development Fund (CDF). Some MPs are also concerned that local councilors will run against them in the next election and therefore see them as political rivals. Likewise, DCs and DEC staff were operating without councilors for nine years, and while some welcome their presence and the political legitimacy they bring to the local level, tensions have flared elsewhere. In other cases, there simply isn’t the institutional habit of working together. Finally, barriers such as the cost of holding committee hearings limits the frequency of engagement between councilors and DEC staff.

LOCAL REVENUE COLLECTION IN MALAWIIn many districts, the largest current source of local revenue is fees collected from markets. Markets in Malawi are typically open-air collections of stalls, with vendors providing a wide range of goods and services, from vegetables, grains, and meat to household goods, hairdressing, and welding services. In most markets, vendors are supposed to pay a fixed fee for each day they sell in the market (typically MK100 - MK150, or about $0.14-$0.21), and the local government in return is supposed to provide basic services in the market. Each market is run by between one and eight full-time tax collectors7 and a Market Master, all government employees. These in turn report to a Revenue Collector or Zone Manager, who typically oversees about five markets. These managers in turn report to the District Revenue Manager. Each day, tax collectors are supposed to walk around the market each day collecting fees and giving out receipts. At the end of the day, they are responsible for depositing the cash in the bank and bringing a receipt to the zone manager. However, in practice, tax compliance in markets is low. Preliminary fieldwork conducted in 10 markets suggests that, on average, only 35% of vendors pay their fees consistently (standard deviation = 8%); this suggests the potential for significant improvement. Our preliminary fieldwork identified two main categories of barriers to higher tax compliance: vendors are unwilling to pay voluntarily, and local governments lack the capacity to enforce the tax and collect it efficiently. These are described in more detail below. We highlight that the size of the market tax is not a significant reason for non-compliance: in focus group interviews, vendors consistently (if begrudgingly) acknowledged that it was not the fee amount that caused low compliance, and that even raising the (currently very modest) fee would not result in lower compliance. In other words, low tax compliance is driven by the breakdown of the relationship between local government and market vendors, not economic reasons.

Bottom-Up Barriers to Tax CollectionThe effects of low government capacity on tax collection could be mitigated if market vendors were willing to pay their fees voluntarily. However, such quasi-voluntary compliance appears to be low for several reasons.

7 Called "Fee Collectors" in Malawian markets. They will be referred to as tax collectors throughout this report



First, vendors perceive that they receive little value in return for their tax payments. In focus group interviews with vendors and tax collectors, respondents continually identified poor market services as a reason for vendors’ tax noncompliance. To many vendors, their market’s lack of public services serves to break down their trust in government and erode the legitimacy of the market tax itself. Most respondents believed that a major reason for the tax itself was to fund these public services; almost every single focus group and interview pointed to the need for better services as a reason for low fee payment rates. There is also significant agreement regarding which services should be funded using vendors' taxes: clean toilets, trash pick-up, access to clean water, floor and stall maintenance, and security services, particularly at night. Toilets stood out as a particular priority. Currently, many of the markets we visited have very few toilets or may have only toilets “for pay,'' which are often not sanitary and do not have running water. The vendors, who often work daily at the market, believe that access to sanitary services within the market is their right as taxpayers. This is also an economic issue; vendors indicated in our interviews and focus groups that free access to toilets for customers would likely increase purchases made at the market and that the ability to walk around at leisure safely may allow for more foot traffic.However, the problem of poor service delivery is compounded by a belief that both tax collectors and local government are not accountable to citizens. In more than one case, vendors made specific accusations of corruption against tax collectors, and in almost every interview, they expressed general distrust that the taxes are allocated toward anything other than government salaries. Thus, as a barrier to tax collection, the problem of weak service delivery in markets is actually twofold. Vendors are aware that market fees should fund service delivery in markets in theory, but in practice they neither trust government to spend tax revenue on service delivery nor see evidence this is happening on the ground. Over time, these two barriers have compounded each other.Finally, our research indicates that the primary reason that accountability is so poor is that vendors feel excluded from the tax collection system. Respondents argued that market vendors associations had been excluded from tax collection institutions and processes, and that this was a barrier to achieving “buy-in'' from many vendors. Without input or at least insight into the tax collection system, vendors see the system as a corrupt, abused, and mismanaged “black box.”Top-Down Barriers to Tax Collection

A number of government-side factors affect revenue collections. First, the current structure of tax collection is relatively inefficient. Each market has one or more full-time tax collectors; large markets may have up to eight or ten. These visit each vendor each day to collect the MK 100-150 payment, and are supposed to grant a receipt. However, markets appear to have little data on their vendors. For example, without a list of vendors or even any nuanced understanding of anticipated number of vendors on any given day, it is difficult to track who is and is not paying taxes. This leads to two key issues with the tax collection process. One is that the system of visiting each stall makes it easy for vendors to simply avoid the tax collector; chasing down individual vendors therefore becomes difficult and time-intensive, especially without a list of vendors who have and have not paid. Second, the system of having the vendor pay cash and the collector issue a receipt (“ticket'') is prone to



corruption. There is significant potential for bribery, under-payment, and evasion. These issues significant decrease the revenues available for government, and increase the costs of tax collection. Second, the tax collectors themselves have low capacity and little motivation to work hard. Collectors lack many mechanisms to enforce taxes on those who wish to avoid them; although in some cases they are able to confiscate goods or enlist market committees to help convince vendors to pay, these tactics are often not employed or not effective. Further, tax collectors lack the monetary incentive to work hard and increase revenues. Almost all tax collectors interviewed were paid at a fixed rate of MK 20,000 per month, which is equivalent to less than $1 per day. Most do not receive commission or bonuses. The few reports of commission programs indicate that these commissions are based on achieving often conservatively low annual targets, which dis-incentivizes collecting “extra'' revenue, leaves room for pocketing a significant amount while still achieving targets, and compels collectors to wait a long time to get their bonus. Many collectors that they feel no incentive to go out of their way to spend additional time and energy on enforcement. Low pay also likely contributes to the levels of corruption observed by vendors. Additionally, monitoring of tax collection is low. While markets are organized into zones that each have a manager (zone manager or revenue collector)—who could play the role of supervising tax collectors in their work—there are currently no strong monitoring systems in place. This reduces the incentives for tax collectors to perform well, but also means that managers may lack good information about the barriers to tax collection that individual markets may face. It appears that lack of transportation is one reason for this low level of monitoring. Once again, cash flowing from the collectors to the managers and the managers to the district is often ciphered off for corruption, especially in the many markets where these cash transfers happen only once every few weeks.

Finally, once the market fees cash reaches the district, there is no established, rigorous, and transparent system for tracking the funds. The districts are supposed to have a computerized system (IFMIS) that allows them to track revenue, but few use this system, partially because it is out of date, partially because districts do not have working computers, and partially because the technical expertise to utilize the system for financial planning purposes does not exist at the district level. In their scoping activities, LGAP heard stories about cash from markets being handed to a financial officer at a district, who then immediately handed it out to those in need of wages, or sitting allowances, or other reimbursements, without the cash every being “officially'' deposited or registered in the government coffers in any way.



APPENDIX B: INTERVENTION TIMELINEThe estimated timeline for the intervention as of December, 2017 is as follows:

October 2016: LGAP activities begin April 2017 – ongoing: Obtain buy-in from all relevant stakeholders, including

district councils May 2017: Pilot Baseline survey; Create maps of all markets in target

districts; Choose markets to be included in sample July - September 2017: Baseline data collection September 2017: Assign markets to treatment groups November 2017 - September 2018: Monthly data collection from DAI and IPA

ongoing November - December 2017: Market committee elections held in markets

without valid committees in Bottom-Up markets; Market committee trainings held in Bottom-Up markets

January 2018: Vendor counting operations begin in Top-Down markets January 2018: Kickoff meetings are held in Bottom-Up markets; SMS revenue

campaign begins in Bottom-Up markets; March 2018: Mobile money system for tax collection implemented in Top-

Down markets April 2018: Incentive scheme for tax collectors and market teams launches in

Top-Down markets April - August 2018: Construction of market service improvement projects in

Bottom-Up markets June - August 2018: Completed construction projects handed over to markets September - October 2018: Endline data collection September 2021: LGAP activities conclude



APPENDIX C: BALANCE TABLE

Control Top-down Bottom-up

Both TD and BU

(1) vs. (2), p-value






Respondent Gender 0.30 0.34 0.35 0.34 0.00 0.00 0.00 0.51 0.99 0.50

Respondent Age 33.55 33.69 33.45 33.84 0.60 0.70 0.29 0.36 0.59 0.14

Education 8.25 8.36 8.42 8.15 0.19 0.04 0.30 0.49 0.02 0.00

Monthly household income (MKw)

217621 188936 233360 186279 0.83 0.91 0.81 0.73 0.98 0.72

Sells goods in stall 0.90 0.90 0.92 0.89 0.35 0.05 0.05 0.00 0.31 0.00

Offers service in stall 0.10 0.11 0.09 0.11 0.49 0.04 0.11 0.01 0.37 0.00

Voted in last presidential elections

0.82 0.85 0.84 0.85 0.29 0.49 0.16 0.70 0.74 0.47

Trust in district government (1 to 4 scale)

2.75 2.74 2.76 2.69 0.80 0.87 0.29 0.67 0.43 0.21

Trust in ward councilor (1 to 4 scale)

2.67 2.62 2.77 2.62 0.42 0.06 0.39 0.01 0.98 0.01




Both TD and BU







Trust in people in this market (1 to 4 scale)

3.30 3.31 3.31 3.26 0.81 0.76 0.43 0.96 0.32 0.26

Trust in Malawians in general (1 to 4 scale)

2.93 3.01 2.93 2.91 0.12 0.99 0.71 0.10 0.05 0.70

Of past 5 days, number of days full fee paid (integer)

3.75 3.88 3.82 3.79 0.00 0.09 0.35 0.13 0.02 0.44

Perception: number of vendors that pay every day

7.06 6.27 7.03 4.71 0.07 0.94 0.17 0.08 0.37 0.16

Perception: number of vendors that pay sometimes

1.82 2.41 1.58 0.53 0.09 0.48 0.43 0.02 0.26 0.50

Perception: number of vendors that never pay

1.12 1.32 1.39 -0.19 0.44 0.38 0.41 0.81 0.36 0.30

Received receipt for last market payment

0.90 0.91 1.05 0.94 0.97 0.18 0.75 0.19 0.77 0.31

Respondent able to produce

0.26 0.31 0.26 0.27 0.00 0.88 0.11 0.00 0.01 0.13




Both TD and BU







receipt? (yes = 1)

Agree: vendors should always pay (1), or only when they agree with local government (0)?

0.54 0.54 0.54 0.56 0.63 0.65 0.11 0.97 0.27 0.24

How strongly do vendors agree with tax statement( 0=strongly, 1=very strongly)

0.66 0.65 0.68 0.67 0.38 0.19 0.55 0.03 0.14 0.48

Perception: if I wanted, I could refuse to pay market fee (1 to 4 scale; 4 strongly agree)

1.54 1.47 1.45 1.48 0.28 0.12 0.30 0.68 0.95 0.62

Number of times seen fee collector in past 5 days

4.38 4.47 4.43 4.41 0.24 0.54 0.68 0.55 0.44 0.85

N 3063 2946 3297 3082


usaid peru baseline report · web viewthird, respondents’ views are less moderate when assessing...

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