Association for Public Policy Analysis & Management

Citizen participation in government budgeting process has been widely advocated by both academicians and practitioners of public management. Despite citizen involvement in budgeting has become increasingly popular around the world, empirical analyses of whether and how citizen input actually affects budgetary outcomes are very limited. To fill this gap, this study examines whether citizen involvement in the budget process enhances efficiency and equity of public resources allocation. Specifically, we test if greater citizen involvement affects the size of the total budget and distribution of funds among different budgetary categories.

In theory, citizen participation in budgeting serves two main goals. First, it improves the information flow between policy makers and citizens, and allows for a better match between public preferences and allocation of scarce resources. Second, it makes public officials more accountable to the public and reduces the opportunities for rent-seeking and corruption. As a result, citizen involvement should make public budgeting more efficient, responsive, and equitable in terms of distribution of cost and benefits among social groups. Drawing on the above the theoretical considerations, we formulate two hypotheses. First, it is hypothesized that budgetary processes that allow for greater public input will be associated with a larger budget size, operationalized as the ratio of government budget expenditures out of the country’s GDP. Second, following Peterson’s (1981) classification of government programs into three types: developmental, redistributive, and allocational, it is expected that when the budget process is more open to public comment, the governments will spend more on redistributive programs compared to developmental and allocational programs. To empirically test our theoretical propositions, we use a panel data set of 100 countries from 2012 to 2016. We operationalize citizen participation in budgeting using the new created Public Engagement Index from the International Budget Partnership (IBP). The index offers a consistent cross-country measure of involving citizens in the public budgeting process. The models control for various political, fiscal, economic, and cultural context in each country. The data sources mainly come form World Bank, IMF, and OECD. In order to deal with the econometric issue of endogeneity between citizen participation and budgetary outcomes, we employ both panel instrumental variables estimation and dynamic panel model estimation.

This study makes contributions to the literature on citizen participation in three important ways. First, the study expands the theoretical understanding of the determinants of budgetary resource allocation. Second, it explores how citizen inputs matters for setting budgetary priorities. Third, it offers policy recommendations for engaging citizens in the budgeting process to enhance fiscal accountability of governments.