Kevin and I have long been interested in political business cycles in developing countries. We have a 2000 JLE piece called Political Cycles in Non-Traditional Settings, Theory and Evidence for Mexico, where we find a significant postelection economic collapse but no preelection boom, and that elections create, rather than resolve, inflation uncertainty.
So it was interesting to see the WSJ yesterday remarking on the same phenomena in Mexico in an article called “Mexico’s Curse of Economic Slowdown.” Anthony Harrup puts Mexico’s weak economic growth in 2013 in political context, noting that the first year of a new presidency often brings with it disappointing economic performances.
He lists GDP growth rates in the first and last years of presidential terms. Presidents can only serve one term in Mexico so a transition always involves a change of leadership.
1994, last year of Carlos Salinas de Gortari 4.7%
1995, first year of Ernesto Zedillo -5.8%
2000, last year of Ernesto Zedillo 5.3%
2001, first Year of Vicente Fox -0.6%
2006, last year of Vicente Fox 5.0%
2007, first year of Felipe Calderón 3.1%
2012, last year of Felipe Calderón 3.8%
2013, first year of Enrique Peña Nieto 1.2%*
* Private consensus estimate from Bank of Mexico survey
Source: Inegi, Bank of Mexico
I didn’t know there was a term for this phenomena, but apparently the economist Jonathan Heath has named it the “sexenio curse” (presidents serve a 6 year term, or sexenio). It was curious to find such a pronounced political business cycle in a one-party system, but the Mexican political system was unique in creating the incentives for one. It’s interesting that the phenomena lives on in a democratic Mexico. Perhaps we should update our paper and see if this new PBC is statistically significant…