Discipline and disasters: The political economy of Mexico’s Sovereign Disaster Risk Financing Program

Evidence suggests that voters punish politicians for the occurrence of natural disasters but reward them for the allocation of post-disaster aid. These behaviors create incentives for politicians to overspend on post-disaster aid, in particular in election years. Advocates of Sovereign Disaster Risk Financing and Insurance (SDRFI) Programs claim that these programs help to eliminate these incentives through transparent rules that govern politicians’ behavior (Dana and Von Dahlen, 2014).  This note examines voters’ behavior and these claims in the context of Mexico, where the Federal Government has adopted a SDRFI strategy. It finds that voters punish incumbent political parties for the occurrence of natural disasters. It also finds that the Mexican governors are more likely to request, and the Federal Government is more likely to declare, natural disasters during election years. Finally, it finds that while using parametric thresholds to determine natural disaster declarations may help to discipline politicians in election years, the fact that some types of events do not use thresholds may erode parametric thresholds’ disciplining value.