engleski

The effects of budget transparency on budgetary balance and expenditures of Croatian local governments

As part of the further democratization of the political and budgetary process, there is a growing research focus on the causes and consequences of budgetary / fiscal transparency. Although research initially focused mainly on central governments, there is an increasing number of papers focusing specifically on lower levels of government. This paper investigates the impact of budget transparency on the level of all 556 Croatian local governments’ expenditures and budgetary balances over the period 2014-2019. Budget transparency is measured annually for 128 cities and 428 municipalities as an online availability of five key budget documents – budget proposal, enacted budget, citizen budget, mid - year and year - end reports. The first goal of the paper is to explore the effects of budget transparency on the level of executed local government budget expenditures. Local government’s level of expenditure is expressed in per capita terms. The second goal of the paper is to see how does budget transparency affects the budget balance of local governments. The budgetary imbalance is measured as the share of the local government’s surplus / deficit in total revenues. To establish the searched for impact, the panel data analysis with several control variables (such as political competition, residents' income per capita and re-election of incumbents) is used. The results are expected to contribute to the public choice theory, especially the fiscal illusion theory, where transparency can serve as a solution to the illusion of perceived amounts of budgetary expenditures. In this sense, the results are expected to detect how fiscal transparency affects local expenditures, that is, whether it affects incumbents' fiscal conservatism or liberalism. Also, consistent with theoretical underpinnings and empirical research to date, it is hypothesized that greater budgetary transparency will contribute to a more balanced budget.

budget transparency, local governments, expenditures, budget balance, Croatia

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