Abstract
We examine how the entry of gig-economy platforms in developing markets affects informal economy participants. Some advantages of gig-economy platforms such as flexibility and low entry barriers already exist in informal economies. But others such as algorithmic matching, bring greater efficiency to a largely unstructured market, suggesting that informal economy participants should join platforms. However not all do. Why do some informal economy participants choose to compete against gig-economy platforms rather than join them? Drawing and extending on the concept of social capital, we hypothesize that informal economy participants with greater horizontal and vertical social capital will eschew platforms entirely. Horizontal social capital develops between informal participants in the form of relational networks while vertical social capital forms between participants and customers. We examine what happened to Kazakhstan’s informal taxi market after Uber and Yandex.Taxi entered the market. We survey 220 drivers to find out why some drivers chose to avoid the platforms entirely. We find support for our arguments suggesting that social capital created in the informal economy can offset the benefits of gig-economy platforms in developing markets, adding to our understanding of how digital technologies transfer to dissimilar contexts.