Discipline and disasters

Transcription

1 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 Laura Boudreau Discipline and disasters 1 / 41

2 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. Laura Boudreau Discipline and disasters 2 / 41

3 Research questions Voter behavior (first stage): 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: 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? Laura Boudreau Discipline and disasters 3 / 41

4 Outline Related literature & this project s contribution Empirical setting Data Identification strategies and preliminary analyses Next steps Laura Boudreau Discipline and disasters 4 / 41

5 Related literature: Voter behavior Previous work establishes that voters behave in ways that generate suboptimal incentives for politicians: 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%. Laura Boudreau Discipline and disasters 5 / 41

6 Related literature: Politician behavior Previous work also shows that politicians respond to these behaviors by being overly responsive in election years. 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. Laura Boudreau Discipline and disasters 6 / 41

7 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: "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. Laura Boudreau Discipline and disasters 7 / 41

8 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. Laura Boudreau Discipline and disasters 8 / 41

9 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, Important updates to thresholds in 2000 and 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. Laura Boudreau Discipline and disasters 9 / 41

10 Mexico and the FONDEN: Natural disaster policy Natural disaster declaration and funding allocation governed by two-stage process. Laura Boudreau Discipline and disasters 10 / 41

11 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. Laura Boudreau Discipline and disasters 11 / 41

12 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 Threshold 1999 None 2000 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. Laura Boudreau Discipline and disasters 12 / 41

13 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 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. Laura Boudreau Discipline and disasters 13 / 41

14 Data Natural disaster data: Original panel data set of municipality-by-day natural disaster declaration requests and declarations from 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: 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.) Laura Boudreau Discipline and disasters 14 / 41

15 Data: Summary statistics Table : Summary Statistics Statistic N Mean St. Dev. Min Max Panel A State: Year ( ) Annual Num Munis Req Annual Num Munis Dec Annual Num Threshold Munis Dec Municipality: Year ( ) Num Requests 2, Num Decs 2, 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 Note: These statistics are for the 1145 municipalities out of 2457 that experience at least one cartel homicide between December 2006-December Laura Boudreau Discipline and disasters 15 / 41

16 Summary Statistics Note: 1999 and 2000 not shown due to missing values. Laura Boudreau Discipline and disasters 16 / 41

17 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: Do voters reward politicians for the allocation of reconstruction funds through FONDEN? Estimate using regression discontinuity for incumbent party voteshare around the p90 threshold. Laura Boudreau Discipline and disasters 17 / 41

18 Voters Response to Natural Disasters VoteShare ipt = α + β DisDec it 1 + γ i + λ t + ε it 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 DisDec it 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 Laura Boudreau Discipline and disasters 18 / 41

19 Voters Response to Natural Disasters Coalitions across political parties are extremely common in gubernatorial elections, which poses two main challenges: 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). Laura Boudreau Discipline and disasters 19 / 41

20 Voters Response to Natural Disasters Table : Voter Response to Natural Disaster Declarations Presidential Gubernatorial (1) (2) State-level analysis Standard Score (0.007) (0.031) N Municipal-level analysis Standard Score (0.013) Observations 4,885 Note: 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. Laura Boudreau Discipline and disasters 20 / 41

21 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? Laura Boudreau Discipline and disasters 21 / 41

22 Governors requests for disaster declarations Are governors more likely to request disaster declarations in election years? Req it = α + βelect t + γ i + ε it i indexes states and t indexes years. Req it 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). Laura Boudreau Discipline and disasters 22 / 41

23 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 ** (0.047) Probit M.E ** (0.062) Conditional Logit M.E ** (0.056) State FE Y Observations 256 Note: 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. Laura Boudreau Discipline and disasters 23 / 41

24 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? Laura Boudreau Discipline and disasters 24 / 41

25 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 Non-elect, no thresh Non-elect, thresh Elect, no thresh Elect, thresh Mean # Req Ratio threshold types Mean # Dec Ratio threshold types Ratio req to dec Laura Boudreau Discipline and disasters 25 / 41

26 Threshold versus nonthreshold events NumReq iet = α + β 1 NonThresh iet + β 2 Elect it + β 3 NonThresh iet Elect it + γ i + λ t + ε iet (1) NumDec iet = α + β 1 NonThresh iet + β 2 Elect it + β 3 NonThresh iet Elect it + δnumreq iet + γ i + λ t + ε iet (2) i indexes states, e event requests, and t years. Note: year fixed effect for calendar; election years straddle two calendar years. NumReq iet and NumDec iet are the number of municipalities requested by a governor and declared by the FGM, respectively. Laura Boudreau Discipline and disasters 26 / 41

27 Threshold versus nonthreshold events NonThresh iet is an indicator for whether an event is a threshold or a nonthreshold event. Elect it is an indicator for a federal or a state election year, depending on the regression. γ i and λ t are state and year fixed effects, respectively, and ε iet is the residual. Standard errors are clustered at the state level. Laura Boudreau Discipline and disasters 27 / 41

28 Threshold versus nonthreshold events Table : Requests for non-threshold and threshold events in election years Dependent variable: Num Requested Num Declared Num Requested Num Declared (1) (2) (3) (4) Fed elect (17.763) (4.694) State elect (4.841) (1.946) Non-thresh (8.317) (1.669) (5.005) (2.769) Fed elect*non-thresh (16.195) (4.511) State elect*non-thresh (11.861) (3.119) Num requested (0.034) (0.028) State FE Y Y Y Y Year FE Y Y Y Y Observations Note: p<0.1; p<0.05; p<0.01 Laura Boudreau Discipline and disasters 28 / 41

29 Next steps to determine welfare implications Compare nonthreshold (threshold) events declared in nonelection years to nonthreshold (threshold) events declared in election years. 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? Laura Boudreau Discipline and disasters 29 / 41

30 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. Laura Boudreau Discipline and disasters 30 / 41

31 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. Laura Boudreau Discipline and disasters 31 / 41

32 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. Laura Boudreau Discipline and disasters 32 / 41

33 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. Laura Boudreau Discipline and disasters 33 / 41

34 Appendix Laura Boudreau Discipline and disasters 34 / 41

35 Socioeconomic and other data (for now) Political 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 ( ). List of municipalities targeted for the 2011 Regional Development Program for marginalized municipalities (studied in Dal Bó, Finan, and Rossi (2013)). Other: Municipality population (2000, 2005, 2010). Annual number of Oportunidades (contingent cash transfer program) beneficiaries-by-municipality for (annual ). Laura Boudreau Discipline and disasters 35 / 41

36 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). Laura Boudreau Discipline and disasters 36 / 41

37 Discretion over municipality request Estimate a linear probability model and a probit model: Req sid = α + β 1 Pop siy + β 2 Z siy + δdist2thresh sid + γ s + λ y + ε sid (3) Req sit is set equal to 1 if a governor of state s requested municipality i on day d to be declared for rainfall disaster. Pop siy 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. Z siy 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. Laura Boudreau Discipline and disasters 37 / 41

38 Discretion over municipality request Dist2Thresh sid controls for how much rainfall a municipality receives. γ s and λ y are state and year fixed effects, and ε it is the residual. Standard errors are clustered at the state level. Laura Boudreau Discipline and disasters 38 / 41

39 Discretion over municipality request Table : Selection based on population and Oportunidades beneficiaries log(pop) (0.004) (0.003) Dependent variable: Request status L.P.M. Probit M. E. L.P.M. Probit M. E. (1) (2) (3) (4) log(ops Families + 1) (0.003) (0.002) Dist 2 Thresh (0.004) (0.004) (0.004) (0.0001) State FE Y Y Y Y Year FE Y Y Y Y Observations Note: p<0.1; p<0.05; p<0.01 Laura Boudreau Discipline and disasters 39 / 41

40 Results: Discretion over municipality request Table : Selection based on political factors Dependent variable: Request status L.P.M. Probit M. E. L.P.M. Probit M. E. (1) (2) (3) (4) log(pop) (0.008) (0.007) (0.010) (0.010) Homicides (0.0003) (0.0006) Reg Dev Prog (0.036) (0.085) Dist 2 Thresh (0.004) (0.002) (0.003) (0.004) State FE Y Y Y Y Year FE Y Y Y Y Observations Note: p<0.1; p<0.05; p<0.01 Laura Boudreau Discipline and disasters 40 / 41

41 Data: Indices and weather data Comisión Nacional del Agua (CONAGUA) is the technical agency in charge of determining eligibility for rainfall events. From CONAGUA: Historical weather station data set: 5387 weather stations covering the period (N=59,458,992). Main variable of interest: Daily rainfall (mm). CONAGUA s p90 thesholds calculated on Calculated once previously following 2004 rule change. Algorithm for matching municipalities to weather stations. Laura Boudreau Discipline and disasters 41 / 41