Budget Transparency And Debt Of Cities In Croatia

This paper analyses the relationship between the level of online budget transparency (OBT) and Croatian cities' direct debt. The OBT is measured by the Open Local Budget Indices OLBI and OLBI+. The indebtedness is defined as the direct debt measured as direct debt per capita, the share of direct debt in total revenues and the share of direct debt in total expenditures. The goal of the paper is to empirically determine possible clusters, i.e. to group cities depending on their levels of OBT and indebtedness. The cluster analysis covers all 128 Croatian cities for the 2019 – 2021 period. The results show that cities with a lower level of OBT have a higher amount of direct debt, higher amount of unpaid overdue liabilities and higher unemployment rates. Furthermore, cities with lower levels of OBT have smaller population, less income per capita and less political competition. The research is the first attempt of analysing the relationship of the OBT and the debt at subnational levels of government; results of the cluster analysis indicate that it is necessary to publish more budget documents so that citizens can participate in the budget process, and consequently, the level of direct debt of cities would decrease.