Discipline and disasters
The political economy of Mexico’s Sovereign Disaster Risk Financing
Program
Laura Boudreau
University of California-Berkeley & The World Bank/GFDRR
June 5, 2015
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Motivation
Previous literature demonstrates that voters provide incentives that
lead politicians to be overly responsive to natural disasters in election
years (Healy and Malhotra, 2009; Cole et al., 2012; Fuchs and
Rodriguez-Chamussy, 2014).
This distortion of politicians’ incentives leads to substantial public
welfare loss (Healy and Malhotra, 2009).
Consistent with these findings, the World Bank identifies discipline
and accountability as important pathways to impact for SDRFI
Programs (Dana and Von Dahlen, 2014).
But there have been no impact evaluations of SDRFI Programs’ effect
on politicians’ behavior in light of likely suboptimal incentives.
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Research questions
Voter behavior (first stage):
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Do Mexican voters punish politicians for the occurrence of natural
disasters?
Do Mexican voters reward politicians for the delivery of post-disaster
aid? (Not yet analyzed.)
FONDEN effectiveness:
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Do Governors of Mexican States request more natural disaster
declarations during election years?
Does the Federal Government grant more natural disaster declarations
during election years?
Does the FONDEN help to discipline politicians in light of potentially
suboptimal incentives?
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Outline
Related literature & this project’s contribution
Empirical setting
Data
Identification strategies and preliminary analyses
Next steps
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Related literature: Voter behavior
Previous work establishes that voters behave in ways that generate
suboptimal incentives for politicians:
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Healy and Malhotra (2009): Voters reward post-disaster aid, but not
pre-disaster risk mitigation spending.
Cole et al. (2012): Voters punish incumbent parties for exogenous
shocks but reward them for responding to disasters.
Fuchs and Rodriguez-Chamussy (2014): Receiving indemnity payments
increases average incumbent party voteshare by 7.6%.
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Related literature: Politician behavior
Previous work also shows that politicians respond to these behaviors
by being overly responsive in election years.
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Healy and Malhotra (2009): 1 p.p. increase in the incumbent’s
previous vote share in a county leads to an average increase of 1.8% in
the amount of relief spending that a county receives.
Cole et al. (2012): Suggestive evidence that government generosity
with disaster aid increases in election years.
Gasper & Reeves (2012); Reeves (2011): In the U.S., governors up for
reelection request more disaster declarations in election years, and
presidents grant more disaster declarations in election years.
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Logical next step: What role for SDRFI to discipline
politicians?
Findings suggest that society may benefit from pre-specifying rules for
when and how post-disaster funding is allocated:
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"Rules rule!" - Stefan Dercon
Evidence from other policy areas shows that rules enhance political
accountability and constrain corrupt behavior (e.g., Ferraz and Finan
(2011)).
Suggests an important potential benefit of SDFRI Programs.
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Evalution of FONDEN effect on political behavior
In Mexico, El Fondo de Desastres Naturales (FONDEN) is governed
by rules determining the process by which natural disasters are
declared and post-reconstruction funding is allocated.
Variation in the stringency of FONDEN’s rules (parametric thresholds
for some types of events) and variation in politicians’ incentives
(election years) provide an ideal context in which to identify the
effects of disciplining politicians.
Also allows analysis of dimensions along which politicians still have
discretion.
Many other interesting aspects of FONDEN that will be incorporated
into this analysis.
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Mexico and the FONDEN: Natural disaster policy
In 1996, the Federal Government of Mexico (FGM) established the
National Natural Disaster Fund, FONDEN.
FONDEN became operational with the first operating rules and
guidelines published on March 31, 1999.
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Important updates to thresholds in 2000 and 2004.
FONDEN primarily finances reconstruction of public assets and
low-income housing.
Federal Government of Mexico considers discipline as one of its
primary reasons for managing post-disaster reconstruction through the
FONDEN.
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Mexico and the FONDEN: Natural disaster policy
Natural disaster declaration and funding allocation governed by
two-stage process.
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FONDEN Thresholds
FONDEN Guidelines specify specific thresholds for some perils but not
for others.
Technical feasibility determines for which types of events the
government uses thresholds.
Threshold event
Extreme rainfall
Drought
Frost
Hail
Snow
Forest fire
Non-threshold event
Flooding*
Hurricane/tropical storm*
Earthquake/tsunami
Landslide
Tornado
Avalanche
* De facto, for flooding classified as "flooding due to rainfall" and for most storm events, the
rainfall threshold is used. For storms, this is because the government does not have the
capability to determine windspeed at the municipal level.
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FONDEN Thresholds
I will specifically analyze the extreme rainfall threshold.
More than half of all days requested to be declared are for extreme
rainfall.
Year
1999
2000
2004
Threshold
None
Amount of water precipitated in a given period exceeds maximum historical values in the same region and time of year or Greater than 1 standard
deviation above the historical average of the affected region (calculated
using the best information available) (& occurrence of damage).
p90: Daily rainfall considered severe when compared with the number of
maximum rainfall in 24 hours of the reference month, and it is deemed
that the rainfall is larger than 90% of the values in the sample. The
sample will be composed of all the available historic data.
We have the thresholds and all related data from CONAGUA, the
technical agency that manages these events.
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Mexico and the FONDEN: Political system & parties
Mexico is a federal presidential representative democratic republic
consisting of 31 states and one federal district.
Presidents and state governors elected once every six years in
"first-past-the-post" elections. State elections are staggered.
Although a multiparty system, the Institutional Revolutionary Party
(PRI) dominated Mexican politics from 1929-2000.
PRI lost the 2000 presidential election, however, and presidential
elections have been competitive since.
State governors have remained mostly PRI since 2000, but with much
turnover.
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Data
Natural disaster data:
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Original panel data set of municipality-by-day natural disaster
declaration requests and declarations from 1999-2013.
By law, natural disaster declarations must be posted in the Diario
Oficial de la Federación, which is published online.
I don’t see requests that are completely denied, but according to former
head of FONDEN, very rare.
320 unique declarations from 10/22/04-12/31/13.
Political data:
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Municipality-level presidential election results. Municipality-level
gubernatorial election results for as many states as are available (may
be first person to put these data together.)
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Data: Summary statistics
Table : Summary Statistics
Statistic
Panel A
State: Year (2005-2013)
Annual Num Munis Req
Annual Num Munis Dec
Annual Num Threshold Munis Dec
Municipality: Year (2001-2013)
Num Requests
Num Decs
Panel B (State level)
Federal Election Results
Incumbent voteshare
Winner-loser gap
Gubernatorial Election Results
Incumbent voteshare
Winner-loser gap
Panel C (Municipality level)
Population
Annual Oportunidades beneficiaries
Number of cartel-related homicides∗
N
Mean
St. Dev.
Min
Max
288
288
288
29.1
16
9.8
77.5
40.85
26.3
0
0
0
642
323
212
2,275
2,275
4.587
2.644
3.7369
2.3858
0
0
19
23
96
96
0.335
0.112
0.111
0.088
0.035
0.0005
0.640
0.402
57
57
0.449
0.107
0.114
0.095
0.025
0.005
0.620
0.410
7353
28722
41220
42682.75
2145.4
7.252
127192
2969.1
61.94
93
1
0
1820888
47956
2925
Note: These statistics are for the 1145 municipalities out of 2457 that experience at least one cartel homicide
between December 2006-December 2010.
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Summary Statistics
Note: 1999 and 2000 not shown due to missing values.
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Voters’ Response to Natural Disasters
Do Mexican voters punish politicians for the occurrence of natural
disasters?
When we have finished matching the CONAGUA data sets:
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Do voters reward politicians for the allocation of reconstruction funds
through FONDEN?
Estimate using regression discontinuity for incumbent party voteshare
around the p90 threshold.
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Voters’ Response to Natural Disasters
VoteShareipt = α + β DisDecit−1 + γi + λt + εit
i denotes entity (state or municipality), p denotes the incumbent
party, and t denotes election year
VoteShare is the incumbent party’s voteshare in entity i in election at
time t
DisDecit−1 is the standard score of disaster declarations in entity i in
the year leading up to the election
γ and λ are state and time fixed effects, respectively
Standard errors are clustered at the entity level in all regressions
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Voters’ Response to Natural Disasters
Coalitions across political parties are extremely common in
gubernatorial elections, which poses two main challenges:
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Difficult to identify the "correct" incumbent because coalitions change
across elections;
Coalition formation is endogenous and could respond to the occurrence
of a natural disaster.
In light of these identification challenges, I do not expect gubernatorial
regression results to be as informative as presidential (in which
political parties are more stable).
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Voters’ Response to Natural Disasters
Table : Voter Response to Natural Disaster Declarations
Presidential
Gubernatorial
(1)
(2)
State-level analysis
Standard Score
∗
N
Municipal-level analysis
Standard Score
−0.012
(0.031)
62
61
−0.024∗
(0.013)
Observations
Note:
−0.013
(0.007)
4,885
∗
p<0.1; ∗∗ p<0.05; ∗∗∗ p<0.01
Municipal-level results consistent with Cole et al. (2012), who estimate that
a 1 standard-deviation decline in rainfall decreases incumbent voteshare by
2.6% at a comparable political division in India.
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FONDEN effectiveness
Do Governors of Mexican States request more natural disaster
declarations during election years?
Does the Federal Government grant more natural disaster declarations
during election years?
Does the FONDEN help to discipline politicians in light of potentially
suboptimal incentives provided by voters?
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Governors’ requests for disaster declarations
Are governors more likely to request disaster declarations in election years?
Reqit = α + βElectt + γi + εit
i indexes states and t indexes years.
Reqit is an indicator for whether a governor requests a disaster
declaration in year t.
On average, governors make at least one request 0.44 times per year
in nonelection years (1 request every 2.29 years).
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Governors’ requests for disaster declarations
Table : Requests for disaster declarations in election years vs. nonelection years
Federal Election Year
Request declaration in year (0,1)
Linear Probability Model
Probit M.E.
Conditional Logit M.E.
State FE
Observations
Note:
∗
0.1094**
(0.047)
0.153**
(0.062)
0.143**
(0.056)
Y
256
p<0.1; ∗∗ p<0.05; ∗∗∗ p<0.01
Governors are 11-15% more likely to make a disaster declaration request in
federal election years.
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FONDEN effectiveness
Do Governors of Mexican States request more natural disaster
declarations during election years?
Does the Federal Government grant more natural disaster declarations
during election years?
Does the FONDEN help to discipline politicians in light of potentially
suboptimal incentives provided by voters?
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Threshold versus nonthreshold events
First look: Requests and declarations of threshold and nonthreshold
events changes in election years.
Caveat: Currently assume that governors request same peril that is
ultimately declared.
Table : Disaster Declaration Requests & Declarations in Federal election and
nonelection years
Mean # Req.
Ratio threshold types
Mean # Dec.
Ratio threshold types
Ratio req to dec
Laura Boudreau
Non-elect, no thresh
Non-elect, thresh
Elect, no thresh
Elect, thresh
261
0.254
153
0.310
0.586
767
0.746
340
0.690
0.443
477
0.476
418
0.536
0.876
526
0.524
362
0.464
0.688
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Threshold versus nonthreshold events
NumReqiet = α + β1 NonThreshiet + β2 Electit +
β3 NonThreshiet ∗ Electit + γi + λt + εiet
(1)
NumDeciet = α + β1 NonThreshiet + β2 Electit +
β3 NonThreshiet ∗ Electit + δNumReqiet + γi + λt + εiet
(2)
i indexes states, e event requests, and t years. Note: year fixed effect
for calendar; election years straddle two calendar years.
NumReqiet and NumDeciet are the number of municipalities requested
by a governor and declared by the FGM, respectively.
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Threshold versus nonthreshold events
NonThreshiet is an indicator for whether an event is a threshold or a
nonthreshold event.
Electit is an indicator for a federal or a state election year, depending
on the regression.
γi and λt are state and year fixed effects, respectively, and εiet is the
residual.
Standard errors are clustered at the state level.
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Threshold versus nonthreshold events
Table : Requests for non-threshold and threshold events in election years
Dependent variable:
Fed elect
Num Requested
Num Declared
Num Requested
Num Declared
(1)
(2)
(3)
(4)
−12.227
(17.763)
10.315∗∗
(4.694)
−5.340
(4.841)
1.435
(1.946)
−10.342∗∗
(5.005)
6.296∗∗
(2.769)
14.033
(11.861)
−3.262
(3.119)
State elect
Non-thresh
Fed elect*Non-thresh
−15.843∗
(8.317)
2.933∗
(1.669)
28.628∗
(16.195)
11.395∗∗
(4.511)
State elect*Non-thresh
0.457∗∗∗
(0.034)
Num requested
State FE
Year FE
Observations
Y
Y
320
0.466∗∗∗
(0.028)
Y
Y
320
Y
Y
320
∗
Note:
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Y
Y
320
p<0.1; ∗∗ p<0.05; ∗∗∗ p<0.01
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Next steps to determine welfare implications
Compare nonthreshold (threshold) events declared in nonelection years
to nonthreshold (threshold) events declared in election years.
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Do damage assessments, on average, reveal lower (higher) damages in
municipalities requested in election years?
Cost-benefit analysis of FONDEN support to municipalities declared in
election years to those in nonelection years (e.g., economic and social
outcomes). If declarations are politically-motivated, what are the
welfare costs?
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Additional results on disaster requests and declarations (not
shown)
Same party governors do not request greater or fewer municipalities
compared to governors in other parties.
But, the federal government grants significantly more municipalities to
same party governors.
Governors in less political competitive states request fewer
municipalities during nonelection years than other governors, but
about the same number during election years.
No effect of competitiveness on federal declarations.
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Distance to threshold of requested and declared
municipalities
Use existence of threshold to examine governors’ requests and federal
declarations above and below the threshold.
Federal Government committed to use thresholds to determine
municipalities’ eligibility for rainfall events, but may not enforce
thresholds in election years if voters punish for declaration denials.
Caveat: We are still in the process of (1) Matching across data sets;
and (2) we have a set of ambiguous events for which unclear whether
rainfall threshold being used.
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Distance to threshold of requested and declared
municipalities
Mean distance to threshold of requests below the threshold in all years.
Upward trend in enforcement of threshold by Federal Government.
Figure : DARK BLUE indicates governors’ requests, and DARK RED indicates
the FGM’s declarations.
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Next steps
Complete main data set to finish voteshare and distance to threshold
analyses.
Conduct analysis of costs and benefits of disaster declarations in
election vs. nonelection years.
Add analyses of reconstruction spending and DRM spending.
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Appendix
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Socioeconomic and other data (for now)
Political
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Municipality-level presidential election results. Municipality-level
gubernatorial election results for as many states as are available (may
be first person to put these data together.)
Monthly cartel-related homicides in previous year (2008-2010).
List of municipalities targeted for the 2011 Regional Development
Program for marginalized municipalities (studied in Dal Bó, Finan, and
Rossi (2013)).
Other:
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Municipality population (2000, 2005, 2010).
Annual number of Oportunidades (contingent cash transfer program)
beneficiaries-by-municipality for (annual 2004-2011).
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Discretion over municipality request
Governors also have discretion over when and which municipalities
they request to be declared.
Parametric thresholds allow us to observe when municipalities qualify
to be declared and whether they are requested.
Use to test for factors that are predictive of whether a municipality to
be declared, controlling for distance to threshold and exposure of the
municipality.
Limit to my analysis to municipalities that experience >= 20
millimeters of rainfall in a day (equivalent to two hours of heavy
rainfall by American Meteorological Society).
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Discretion over municipality request
Estimate a linear probability model and a probit model:
Reqsid = α + β1 Popsiy + β2 Zsiy + δDist2Threshsid + γs + λy + εsid
(3)
Reqsit is set equal to 1 if a governor of state s requested municipality i
on day d to be declared for rainfall disaster.
Popsiy is either log municipality population at the time of the most
recent census or log number of Oportunidades beneficiaries in
municipality i for the most recent calendar year.
Zsiy is either the sum of the previous year’s cartel-related homicides or
an indicator for a municipality’s inclusion in the 2011 Regional
Development Program for Mexico’s most marginalized municipalities.
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Discretion over municipality request
Dist2Threshsid controls for how much rainfall a municipality receives.
γs and λy are state and year fixed effects, and εit is the residual.
Standard errors are clustered at the state level.
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Discretion over municipality request
Table : Selection based on population and Oportunidades beneficiaries
Dependent variable: Request status
log(Pop)
L.P.M.
Probit M. E.
L.P.M.
Probit M. E.
(1)
(2)
(3)
(4)
0.006
(0.004)
0.007∗∗
0.010∗∗∗
(0.003)
0.010∗∗∗
(0.002)
(0.003)
log(Ops Families + 1)
Dist 2 Thresh
State FE
Year FE
Observations
0.013∗∗∗
(0.004)
0.007∗∗∗
(0.004)
0.013∗∗∗
(0.004)
0.01∗∗∗
(0.0001)
Y
Y
Y
Y
Y
Y
Y
Y
20177
20177
20312
20312
∗ p<0.1; ∗∗ p<0.05; ∗∗∗ p<0.01
Note:
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Results: Discretion over municipality request
Table : Selection based on political factors
Dependent variable: Request status
log(Pop)
Homicides
L.P.M.
Probit M. E.
L.P.M.
Probit M. E.
(1)
(2)
(3)
(4)
0.021∗∗
0.020∗∗∗
(0.008)
(0.007)
0.009
(0.010)
0.009
(0.010)
−0.0002
(0.0003)
−0.0001
(0.0006)
−0.004
(0.036)
−0.033
(0.085)
Reg Dev Prog.
Dist 2 Thresh
State FE
Year FE
Observations
Note:
Laura Boudreau
0.007∗∗∗
(0.004)
0.007∗∗∗
(0.002)
.008∗
(0.003)
0.008∗
(0.004)
Y
Y
Y
Y
Y
Y
Y
Y
4004
4004
4023
4023
∗ p<0.1; ∗∗ p<0.05; ∗∗∗ p<0.01
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Data: Indices and weather data
Comisión Nacional del Agua (CONAGUA) is the technical agency in
charge of determining eligibility for rainfall events. From CONAGUA:
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Historical weather station data set: 5387 weather stations covering the
period 1902-2015 (N=59,458,992). Main variable of interest: Daily
rainfall (mm).
CONAGUA’s p90 thesholds calculated on 2012. Calculated once
previously following 2004 rule change.
Algorithm for matching municipalities to weather stations.
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