In our previous post we reported on research showing that budget transparency reduces the cost of debt to governments. In another paper in the Open Budget Initiative working paper series, Joachin Wehner (London School of Economics) and Paolo de Renzio (International Budget Partnership) cite empirical research showing that budget transparency also reduces budget deficits and corruption. Given the persuasiveness of the case for budget transparency, it is surprising that more research hasn’t been done on its determinants. Wehner and De Renzio try to plug this gap by looking at the effects of free and fair elections and political competition on budget transparency. Overall, their findings suggest that these domestic political factors play a crucial role in determining the level of budget transparency.

Many historical, structural and natural factors may play a role in the level of budget transparency in a given country. While relevant, research on such factors are less helpful to the policy and advocacy community, because they focus on things that can’t be changed. Knowing for example that francophone administrative heritage countries tend to be less transparent than anglophone heritage systems may hold academic interest, but doesn’t tell us how to make budgets more transparent.  For this reason also Wehner and De Renzio’s analysis is interesting: they look at determinants of budget transparency that can and do change.

Wehner and de Renzio’s first finding is that free and fair elections have a significant effect on budget transparency. Countries that have recently had free and fair elections tend to have more transparent budgets. Interestingly, their results also suggest that high levels of transparency do not rely on a slow process of democratic maturation that may take decades or even centuries. Any recent free and fair elections seem to be enough. The rapid improvements in the OBI scores of countries like Mongolia and Liberia  seem to support these findings.

Interestingly Wehner and de Renzio also find evidence that free and fair elections reduce the well-known adverse effect of natural resource dependency on budget transparency. Natural resource dependency is therefore not an inevitable death sentence to transparency.

Finally, Wehner and de Renzio obtain results that greater political competition is associated with higher levels of budget transparency. They find that the better the representation of opposition parties in the legislature, the higher the level of budget transparency.

While exploratory, this research suggests that proponents of budget transparency can promote greater transparency by supporting broader political reforms such as changes in the electoral system and other measures that enhance political competition. Along similar lines, more research that looks at the impact of media freedom on transparency would also be interesting.

Further, while it is helpful knowing that elections and political competition determinants are statistically associated with budget transparency, reformers and advocates also need to know how this happens. Just what does political competition and elections do to make budget transparency?