Discussing the determinants of online budget transparency based on a spatial regression analysis of Croatian cities and municipalities: Do good neighbours make you better?

Abstract

Taxpayers want to pay as little in taxes as possible to fund an adequate level of public goods and services in their local government, and so they need to keep their local incumbents accountable. Online local budget transparency (OLBT) facilitates this accountability, as it enables citizens to find information online about their local budgets that is timely, accurate, comprehensive and understandable. The aim of this article is to identify the most important determinants of OLBT for all 556 Croatian cities and municipalities from 2014 to 2017. Using a dynamic spatial lag Durbin model, the analysis explores the direct and indirect effects of potential determinants on OLBT. The main contribution is the pioneering use of a dynamic spatial lag Durbin model for researching local budget transparency determinants in a Central and Eastern European democracy. The results show that neighbours have an influence on OLBT but that direct effects dominate; that is, the major OLBT determinants come from within each city/municipality. Particularly important determinants are residents’ income, the local government’s wealth, the number of public employees in the city/municipality and the population size.