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Political Cycles in Nontraditional Settings: Theory and Evidence from the Case of Mexico

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  • Grier, Robin M
  • Grier, Kevin B

Abstract

We create a rotating bandit model of executive turnover in politics with autocratic presidents, large and centralized governments, and limited reelection. The model is an extension of McGuire and Olson's 1996 work. We apply our model by studying the relationship between electoral cycles and economic growth and inflation uncertainty in Mexico, a country with a highly centralized and powerful government, no reelection, and until recently, little political competition. We find a significant postelection economic collapse but no preelection boom, which is contrary to the predictions of the traditional political business cycle model. We also find evidence that elections create, rather than resolve, inflation uncertainty, which contradicts the predictions of the rational partisan model. While our rotating bandit model is largely consistent with the results we find, more work is needed on the real effects of politics in the developing world. Copyright 2000 by the University of Chicago.

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  • Grier, Robin M & Grier, Kevin B, 2000. "Political Cycles in Nontraditional Settings: Theory and Evidence from the Case of Mexico," Journal of Law and Economics, University of Chicago Press, vol. 43(1), pages 239-263, April.
  • Handle: RePEc:ucp:jlawec:v:43:y:2000:i:1:p:239-63
    DOI: 10.1086/467454
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    1. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    2. Chappell, Henry W. & Keech, William R., 1986. "Policy Motivation and Party Differences in a Dynamic Spatial Model of Party Competition," American Political Science Review, Cambridge University Press, vol. 80(3), pages 881-899, September.
    3. Martin C. McGuire & Mancur Olson, 1998. "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," International Economic Association Series, in: Silvio Borner & Martin Paldam (ed.), The Political Dimension of Economic Growth, chapter 3, pages 38-73, Palgrave Macmillan.
    4. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    5. Alberto Alesina, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, Oxford University Press, vol. 102(3), pages 651-678.
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    Cited by:

    1. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    2. Mark Lijesen & Victoria Shestalova, 2007. "Public and private roles in road infrastructure: an exploration of market failure, public instruments and government failure," CPB Document 146, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Khemani, Stuti, 2004. "Political cycles in a developing economy: effect of elections in the Indian States," Journal of Development Economics, Elsevier, vol. 73(1), pages 125-154, February.
    4. Grier, Robin & Grier, Kevin B., 2006. "On the real effects of inflation and inflation uncertainty in Mexico," Journal of Development Economics, Elsevier, vol. 80(2), pages 478-500, August.
    5. Jose G. Vargas-Hernandez, 2010. "From 'entrepreneurial state' to 'state of entrepreneurs': ownership implications of the transformation in Mexican governance since 1982," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 5(1), pages 57-73.
    6. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    7. Andrew Dyke, 2007. "Electoral cycles in the administration of criminal justice," Public Choice, Springer, vol. 133(3), pages 417-437, December.
    8. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Post-Print hal-01291401, HAL.
    9. Schulze, Günther G. & Zakharov, Nikita, 2023. "Political cycles of media repression," BOFIT Discussion Papers 3/2023, Bank of Finland Institute for Emerging Economies (BOFIT).

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