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.

No abstract

This paper investigates the budget transparency of Croatian local governments, i.e., the relationship between the open local budget index (OLBI) and a set of economic, political and socio--cultural variables. It uses a unique panel database of all 128 cities and 428 municipalities in 2015 and 2016. To examine the differences among the samples and years and to determine whether the different samples have different driving forces, a regression analysis based on a Poisson distribution is used. In the total (cities and municipalities) and city samples, average income per capita (p.c.) is the most important determinant of the OLBI, which confirms Ferejohn's principal-agent model. At the municipality level, the findings indicate that political variables (ideology and political competition) are the factors that play the most important role, which is in line with the principal-agent and legitimacy theories. Findings point out to the necessity of reconsidering the number of local governments, particularly smaller ones lacking the capacity for maintaining basic budget transparency standards and to motivate citizens to demand and local governments to offer more budget transparency.

The overall average level of budget transparency in Croatian counties, cities and municipalities, measured by the number of budget documents published on their respective official websites, stands at 3.52 (out of a possible 5). The number of budget documents published has grown year by year in all types of local government units, averaging 4.9 in counties, 4 in cities and 3.3 in municipalities in this research cycle. For the first time, there are no cities without at least one budget document published, or municipalities without an official website. However, despite the improvements in average results achieved, differences among individual local units, notably municipalities, are still huge. A large number of cities and the bulk of municipalities will have to intensify their efforts to comply with their legal obligations and recommendations of the Ministry of Finance in this respect. While the publishing of budget documents does not in itself guarantee absolute transparency, it should still be prescribed and encouraged, because it is the first step towards achieving higher transparency levels necessary for citizens' participation in the budget process. More detailed results for all counties, cities and municipalities are given later in the text and are available on an interactive map and in an Excel table format. 1 This research was funded by the Croatian Science Foundation (CSC) under the project IP-2014-09-3008. CSC also funded the work of doctoral student Branko Stanić. Opinions, findings, conclusions and recommendations are those of the authors and do not necessarily reflect the views of CSC. The authors gratefully acknowledge Marija Višić for her assitance in data collection. 2 The results for previous cycles were published in the articles by Ott, Bronić and Petrušić (2013, 2014 and 2015), as well as by Ott, Bronić, Petrušić and Stanić (2016 and 2017). 3 Irrespective of the formal distinction among the units of local and regional self-government, for the purposes of this article, the term 'local government units' covers all 20 counties, 128 cities and 428 municipalities.

Budget transparency implies having an insight into complete, accurate, timely and understandable budget information. Publishing budgets in a transparent manner allows citizens to contribute to the more efficient collection of public funds and supply of public goods and services, to increase accountability of the Government and local government authorities and thus to reduce opportunities for corruption.For the purposes of this research, budget transparency is measured by the number of key budget documents published on the official websites of Croatian local government units 3 which, in this research cycle, include the following: