Political Stubbornness and Online Local Budget Transparency in Croatia

Online local budget transparency (OLBT) has been recognized as an important feature of good governance. Accordingly, in this paper, OLBT is measured in all 128 cities and a sample of 100 municipalities in Croatia using several key local budget documents published on local government websites. Using a fixed effect Poisson panel model covering the 2013-2017 period, it is shown that along with residents’ income and fiscal capacity of local governments, political ideology and political competition determine the level of OLBT. This paper contributes to the growing body of budget transparency literature by establishing the importance of political factors as determinants of OLBT in this former socialist, fiscally centralized EU member state and reveals the curious stubbornness of the citizens who consistently vote for non-transparent politicians. The main finding is that political factors (political ideology and political competition) matters in determining OLBT, resulting in suboptimal equilibrium of local governments with low levels of OLBT. The local incumbent concludes that OLBT is not a high priority and that his/her constituency will not hold it against him/her. In this environment such a conclusion stands owing to the fact that voters who are * Received: 19-06-2019; accepted: 02-12-2019 1 This work was supported by the Croatian Science Foundation [grant IP-2014-09-3008]. 2 Professor, Senior Research Advisor, Institute of Public Finance, Smičiklasova 21, 10000 Zagreb, Croatia. Scientific affiliation: public sector economics. Phone: +38514886444. E-mail: kott@ ijf.hr. ORCiD: 0000-0003-2242-4181. Website: http://www.ijf.hr/eng/employees/researchers/7/ katarina-ott-phd/1494/ (corresponding author). 3 Assistant Professor, Faculty of Economics and Business, University of Zagreb, Trg J. F. Kennedyja 6, 10000 Zagreb, Croatia. Scientific affiliation: competitiveness analysis, new political economy, political cycles. Phone: +38512383201. E-mail: vmackic@efzg.hr. ORCiD: 0000-0002-32008571. Website: http://www.efzg.unizg.hr/departments/economic-theory/faculty-2831/velibormackic-phd/22082. 4 Senior Research Associate, Institute of Public Finance, Smičiklasova 21, 10000 Zagreb, Croatia. Scientific affiliation: fiscal decentralization and development, tax system, budget transparency. Phone: +38514886444. E-mail: mihaela.bronic@ijf.hr. ORCiD: 0000-00020863-2040. Website: http://www.ijf.hr/eng/employees/researchers/7/mihaela-bronic-phd/150/. Katarina Ott, Velibor Mačkić, Mihaela Bronić • Political Stubbornness and Online... 554 Zb. rad. Ekon. fak. Rij. • 2019 • vol. 37 • no. 2 • 553-585 stubborn in their voting patterns refuse to change the incumbent who created nontransparency.