Online Open Budget: The Effects of Budget Transparency on Budget Efficiency

Abstract

The government budget should be operated efficiently and democratically to promote economic development and social welfare. This article investigates the claim that budget transparency can improve budget efficiency. Based on the 2017 introduction of the online open budget system in South Korea as an example, the difference-in-difference examination reveals that budget transparency reduces the size of the unused budget, an indicator of budget inefficiency. A battery of robustness tests supports this result. Moreover, improving budget efficiency has a more significant effect when budget projects are at the risk of agency problems. Our findings suggest that budget transparency through the online open budget system can enhance budget efficiency by encouraging the public's participation and alleviating the principal-agent problem.