Bertoli P., Garcia A. G., Garoupa N. (2022).
Testing an application of the political insurance model: The case of the Mexican state-level administrative courts. JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION.
The insurance model posits that legislators from a specific political party create courts when they foresee a decrease in their political influence. We develop an application to administrative courts. While the traditional insurance version of the model is about present safeguards against future losses from losing political power, the application is about present safeguards against future losses caused by a potentially disloyal bureaucracy. We test the insurance model with the case of Mexico. Mexican states created 32 administrative courts in the period 1974 to 2017. Two characteristics make Mexico an unusual case. First, states created each of these courts in different time periods. Second, states exhibit significant variance in political cycles. Our empirical findings are largely consistent with the application (dealing with disloyal bureaucracy), but not with the more traditional version (preventing losses from changes in power).
