Abstract
Recent formal models of accountability allow us to make different conditional predictions about how transparency affects voters’ willingness to re-elect incumbents and acceptance of higher taxes. We review two models and investigate empirical implications derived from or related to them, using panel data from 1972—2000 for U.S. state budget process transparency, gubernatorial elections, and tax increases in a small structural model. We do not find that budget transparency has a direct effect on incumbent retention, but we do find clear evidence that increased transparency dampens the negative effect of tax increases on retention of incumbent governors. Independent of this, we also find that increased transparency leads to greater fiscal scale. We suggest some possible directions for future models based on our results.
Highlights
Voters in representative democracies mainly hold politicians accountable through periodic elections
We describe conditions under which it is possible to extract some of our specific predictions about the relationships between incumbent retention, tax growth, and budget transparency from these models
We initially estimated our structural model using three-stage least squares to allow for simultaneous causation between incumbent retention, tax growth and budget transparency
Summary
Voters in representative democracies mainly hold politicians accountable through periodic elections. Within a larger agency literature, a small number of studies ask “What is the effect of government transparency on accountability, that is, on voters’ ability to control politicians via the re-election mechanism?”2 Transparency is often considered beneficial in information-scarce contexts because it “work[s] through increasing the amount of information available to voters” (Besley 2006: 196). A related question is whether transparency increases tax growth, holding the current scale of taxation constant. We examine both those issues as well. Voters tend to punish incumbent governors running for reelection following tax increases (Kone and Winters 1993; Niemi, Stanley and Vogel 1995), if taxes increased more than in neighboring states (Besley and Case 1995). Ferraz and Finan (2008) show that public audits reduce corruption and increase the probability of incumbent retention in Brazilian municipalities
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