The effect of fiscal transparency on corruption: A panel cross‐country analysis

Abstract

AbstractBoth academicians and practitioners have advocated for increased fiscal transparency in government as a means of promoting budget discipline, improving functioning of the public sector, fostering greater accountability, and fighting the global menace of corruption. Despite worldwide calls for greater disclosure, empirical analyses of whether and how fiscal transparency actually affects governance outcomes are still limited. This study draws on public choice and principal–agent theories to demonstrate how public disclosure of budgetary information helps deter government corruption. The data from 95 countries over the period 2006–14 provide evidence that more fiscally transparent countries are perceived as less corrupt. We also find that fiscal transparency matters most at the final stages of the budget process when information disclosure reflects actual government spending. Data also confirm that a Citizens Budget can serve as a strong anti‐corruption tool.