>What’s the incentive for a developer to inflate their estimate?

Under-promise. Over-deliver. I'm not doing software development most of the time but it absolutely works out better for everyone concerned if I get things done on or ahead of schedule without mostly having to resort to a lot of unnatural acts to do so. If there's a real need for something faster, I'll tell people I'll do my best and (usually) I can get there absent blockers from dependencies. But I try to manage things so that I can meet/beat estimates sanely. It probably helps that people think I work quickly even given some sandbagging.