The appearance of democracy: How conditional payments reshape behavior among local leaders

Monetary incentives are widely considered to promote democratic practices in local governance. We test this proposition by providing causal evidence from a lab-in-the-field experiment with local leaders (n=64) and their constituents (n=384) in rural Namibia's hybrid governance setting. Using a within-subject design, we introduced conditional payments to leaders for allowing constituents to vote on how to distribute a collective fund. A majority of leaders (64%) chose a democratic rule at baseline, and the payments did not significantly increase this share. The incentives caused a significant reduction in openly autocratic behavior, primarily through a shift toward a pseudo-democratic practice of appearing democratic while retaining unilateral decision-making. This reveals unintended consequences of the conditional incentives, fostering symbolic compliance where leaders appear democratic while retaining control. Exploratory analysis shows payments "crowd out" democracy among initially democratic leaders but "crowd in" pseudo-democracy among autocratic leaders, moderated by governing motivations. Our findings illustrate that conditional payments can fail to foster genuine democracy and caution against their prescriptive use in complex governance environments.