The effect of fiscal transparency on government spending efficiency
Abstract
Purpose
Making citizens able to monitor and evaluate public spending activities is a fundamental issue in public financial management literature. The purpose of this paper is to analyze whether fiscal transparency, measured by the Open Budget Index, has an effect on public spending performance, measured by the World Economic Forum’s Global Competitiveness Report data.
Design/methodology/approach
Research methods rely on random-effects panel regression models on a country-level panel data set of 82 world countries observed in the 2008–2015 time interval.
Findings
Results show that the potential positive effects of fiscal transparency are mediated by the level of democracy of the country. In detail, in democratic countries, a higher degree of disclosure of fiscal information is correlated with a higher efficiency of government spending while, in non-democratic countries, fiscal transparency does not seem to provide any effect.
Social implications
The results suggest that fiscal transparency can be a powerful device where politicians can be held accountable for their actions, while it could fail to provide positive results where a strong and effective vertical accountability is missing.
Originality/value
The novelty of the paper is twofold. First, it provides new additional evidence about the positive effect that fiscal transparency has on public spending efficiency by advancing previous research on this topic (Porumbescu, 2017; Montes et al., 2019). Second, the paper investigates conceptually and empirically how the positive effect on public spending efficiency determined by fiscal transparency depends on the degree of democracy present in the institutional environment in which fiscal information disclosure is implemented.
Keywords
Acknowledgements
Mariangela Bonasia and Elina De Simone acknowledge financial support from the University of Naples “Parthenope” within the Competitive Research Project “Institutional and Economic Imbalances in the Eurozone and the European Union”.
Citation
De Simone, E., Bonasia, M., Gaeta, G.L. and Cicatiello, L. (2019), "The effect of fiscal transparency on government spending efficiency", Journal of Economic Studies, Vol. 46 No. 7, pp. 1365-1379. https://doi.org/10.1108/JES-03-2019-0123
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited