The Relationship of Budget Participation and Corruption within the Framework of Agency Problem

Abstract

Today, participation of citizens in democratic processes has become a requirement of democracies. This paper aims to explore the relationship between budget participation and corruption. To this end, regression analysis method has been used between the Open Budget Index participation scores published by the International Budget Partnership and the Corruption Perception Index scores published by Transparency International. The results have indicated that there is a moderate (R = 0.335), positive and significant relationship between these two variables. According to the model found, it is determined that the increase in budget participation contributes to reduction of corruption. Although corruption is associated with many socio-economic factors, budget participation is effective in reducing corruption which is huge economic loss for all countries in the world. The findings of the research also have been discussed within the framework of agency problems. The findings have the potential to reduce the problems arising from asymmetric information in agency relationships.

Keywords

• Budget participation
• Budget participation
• Corruption
• Agency problem

Vekalet Sorunu Çerçevesinde Bütçe Katılımı ve Yolsuzluk İlişkisi

Abstract

Günümüzde, vatandaşların demokratik süreçlere katılması, demokrasilerin bir gereği haline gelmiştir. Bu çalışma, bütçe katılımı ile yolsuzluk arasındaki ilişkiyi araştırmayı amaçlamaktadır. Bu amaçla, International Budget Partnership tarafından yayımlanan, Açık Bütçe Endeksi katılım puanları ile Uluslararası Şeffaflık Örgütü’nce yayımlanan Yolsuzluk Algı Endeksi puanları arasında regresyon analizi gerçekleştirilmiştir. Sonuçlar, bu iki değişken arasında orta düzeyde (R = 0.335), pozitif ve anlamlı bir ilişki olduğunu göstermiştir. Analiz sonucunda elde edilen modele göre, bütçe katılımındaki artış, yolsuzlukların azalmasına katkı sağlamaktadır. Yolsuzluk birçok sosyo-ekonomik faktörle ilişkili olmasına rağmen, bütçe katılımı, dünyada tüm ülkeler için büyük ekonomik kayıplara sebep olan yolsuzlukların azaltılmasına katkı sağlayabilmektedir. Araştırmanın bulguları ayrıca vekâlet sorunları çerçevesinde tartışılmıştır. Bulgular, vekâlet ilişkilerinde, asimetrik bilgiden kaynaklanan sorunları azaltacak potansiyele sahiptir.

Keywords

• Bütçe katılımı
• Bütçe katılımı
• Yolsuzluk
• Vekâlet sorunu

References

1. Abed, G.T., Gupta, S. (Eds.), (2002). Governance, Corruption, and Economic Performance. International Monetary Fund, Washington, DC.
2. Acemoglu, D., & Verdier, T. (1998). Property rights, corruption and the allocation of talent: a general equilibrium approach. The Economic Journal, 108(450), 1381-1403. doi.org/10.1111/1468-0297.00347
3. Ades, A., & Di Tella, R. (1999). Rents, competition, and corruption. American Economic Review, 89(4), 982-993.
4. Aidt, T., Dutta, J., & Sena, V. (2008). Governance regimes, corruption and growth: Theory and evidence. Journal of Comparative Economics, 36(2), 195-220. https://doi.org/10.1016/j.jce.2007.11.004
5. Alves, M. L., & Allegretti, G. (2012). (In) stability, a key element to understand participatory budgeting: Discussing Portuguese cases. Journal of Public Deliberation, 8(2), Article-3
6. Allegretti, G. (2014). “Paying Attention to The Participants’ Perceptions in Order To Trigger A Virtuous Circle” s.47-63, N.Dias (ed.), Hope For Democracy – 25 Years Of Participatory Budgeting Worldwide, in Loco Association
7. Andersen, B., Henriksen, B., & Spjelkavik, I. (2008). Benchmarking applications in public sector principal-agent relationships. Benchmarking: An International Journal.
8. Andersen, T. B. (2009). E-Government as an anti-corruption strategy. Information Economics and Policy, 21(3), 201–210. doi:10.1016/j.infoecopol.2008.11.003

9. Andvig, J. C., Fjeldstad, O.H. Amundsen, I., Sissener, T., Soreide, T., (2000), Research on Corruption, A policy oriented survey, Commissioned by NORAD, Chr. Michelsen Institute (CMI) & Norwegian Institute of International Affairs (NUPI).
10. Arvate, P.R., Curi, A.Z., Rocha, F., Miessi-Sanches, F.A. (2010). “Corruption and the size of government: causality tests for OECD and Latin American countries”. Appl. Econ. Lett. 17, 1013–1017. https://doi.org/10.1080/13504850802676207
11. Bergman M, Lane J-E. (1990). Public Policy in a Principal-Agent Framework. Journal of Theoretical Politics, 2(3):339-352. doi:10.1177/0951692890002003005
12. Bhargava V. (2015). Engaging Citizens and Civil Society to Promote Good Governance and Development Effectiveness, The Governance Brief, Issue 23, Asian Development Bank
13. Blume, L., Müller, J., & Voigt, S. (2009). The economic effects of direct democracy a first global assessment. Public Choice, 140 (3-4), 431-461. DOI 10.1007/s11127-009-9429-8
14. CIPFA, I. 2013). Good Governance in the Public Sector, Consultation Draft for an International Framework, London, United Kingdom.
15. Cohen J. (1988). Statistical Power Analysis for the Behavioral Sciences. Hillsdale, NJ: Lawrence Erlbaum Associates
16. Creighton J.L. (2005) The public participation handbook : Making Better Decisions Through Citizen Involvement, John Wiley & Sons, San Francisco, CA, USA
17. De Renzio, P., & Masud, H. (2011). Measuring and promoting budget transparency: The open budget index as a research and advocacy tool. Governance, 24(3), 607-616.
18. Delavallade, C. (2006). Corruption and distribution of public spending in developing countries. Journal of economics and finance, 30(2), 222-239.
19. Dias N. (2014), Hope For Democracy – 25 Years Of Participatory Budgeting Worldwide, In Loco Association
20. Dias N. (2018), Hope For Democracy – 30 Years Of Participatory Budgeting Worldwide, Epopeiarecord, lda
21. Dias N. & Júlio S. (2018). “The next thirty years of participatory budgeting in the world start today”, p. 15-32, 30 Years Of Participatory Budgeting Worldwide, Epopeiarecord, lda
22. Dias N., Enriquez S., Júlio S. (2019), Participatory Budgeting World Atlas 2019, (access; www.pbatlas.net)
23. Drüke, H. (2007). Can E-Government Make Public Governance More Accountable, p.59-87, Anwar Shah, Performance Accountability and Combating Corruption, Washington: The World Bank,
24. Dye, K. M., & Stapenhurst, R. (1998). Pillars of Integrity: The Importance Of Supreme Audit Institutions in Curbing Corruption. Economic Development Institute of the World Bank. Washington, DC
25. Eisenhardt, K. M. (1989). Agency Theory: An Assessment and Review. Academy of Management Review, 14(1), 57-74.
26. Falk R. F., Miller N. B. (1992). A Primer for Soft Modeling. Akron, OH: The University of Akron Press.
27. Fama, E. F., & Jensen, M. C. (1983). Separation of Ownership and Control. The Journal of Law and Economics, 26(2), 301-325.
28. Fang, Z. (2002). E-Government in Digital Era: Concept, Practice, and Development. International Journal of The Computer, The Internet And Management, 10(2), 1-22.
29. Fisman, R., Golden, M.A. (2017). Corruption, What Everyone Needs to Know. USA: Oxford University Press
30. Forrester, J. (2002). The principal-agent model and budget theory. Budget Theory in the Public Sector, Quorum Books, 123-138.
31. Fölscher A. (2007a), Participatory Budgeting in Central and Eastern Europe, p.127-156, Participatory Budgeting, Edited by Anwar Shah, The International Bank for Reconstruction and Development / The World Bank, NY
32. Fölscher A. (2007b), Participatory Budgeting in Asia, 9.157-190, Participatory Budgeting, Edited by Anwar Shah, The International Bank for Reconstruction and Development / The World Bank, NY
33. Fölscher A. (2007c), Participatory Budgeting in the Middle East and North Africa, p.225-242, Edited by Anwar Shah, The International Bank for Reconstruction and Development / The World Bank, NY
34. Gailmard S. (2014), Accountability and Principal-Agent Theory, p. 90-105, The Oxford Handbook of Public Accountability, Oxford University Press, UK
35. Gant, J., Turner-Lee, N. (2011). Government Transparency: Six Strategies for More Open and Participatory Government. USA: The Aspen Institute Communications and Society Program.
36. Garoupa, N., & Jellal, M. (2007). Further notes on information, corruption, and optimal law enforcement. European Journal of Law and Economics, 23(1), 59-69
37. George, D., & Mallery, M. (2019). IBM SPSS Statistics 25 Step by Step A Simple Guide and Reference, Fifteenth Edition, Routledge, NY
38. Goel, R. K., & Nelson, M. A. (1998). Corruption and government size: A disaggregated analysis. Public choice, 97(1-2), 107-120.
39. Goldfrank B. (2007). “Lessons from Latin America’s Experience with Participatory Budgeting” p.91-126, Participatory Budgeting in Brazil, Contestation, Cooperation, and Accountability, The Pennsylvania State University Press, University Park, PA
40. Guo, H. D., & Neshkova, M. I. (2012). Citizen Input in the Budget Process: When Does It Matter Most? The American Review of Public Administration, 43(3), 331–346. https://doi.org/10.1177/0275074012443588
41. Gupta, S., de Mello, L.R., Sharan, R. (2001). Corruption and military spending, European Journal of Political Economy, Volume 17, Issue 4, 2001, Pages 749-777, https://doi.org/10.1016/S0176-2680(01)00054-4.
42. Hair, J. F., Ringle, C. M., & Sarstedt, M. (2011). PLS-SEM: Indeed a silver bullet. Journal of Marketing Theory and Practice, 19, 139–151.
43. Hessami, Z. (2014). Political corruption, public procurement, and budget composition: Theory and evidence from OECD countries, European Journal of Political Economy, 34, (C), 372-389, https://doi.org/10.1016/j.ejpoleco.2014.02.005
44. IBP (2016). Guide to the Open Budget Questionnaire: an Explain of the Questions and the Response Options, Washington
45. IBP (2017). Open Budget Survey, Washington
46. IBP (2019). Open Budget Survey, Washington
47. IMF (2019). Fiscal Monitor, Curbin Corruption, Washington, DC
48. Isaksen J. (2005). The budget process and corruption, U4 ISSUE 3:2005, U4 Anti-Corruption Resource Centre
49. İslamoğlu A.H., Alnıaçık Ü. (2016), Sosyal Bilimlerde Araştırma Yöntemleri, Beta Bas.Yay.Dağ.A.Ş., İstanbul
50. Ixtacuy, L., Prieto, J., & Wills, M. (2014). Anti-Corruption Revolutions: When Civil Society Steps In. Hertie School of Governance.
51. Jenkins, R. (2007). The Role of Political Institutions in Promoting Accountability, 135-181, Anwar Shah, Performance Accountability and Combating Corruption, Washington: The World Bank
52. Johnson, S., Kaufmann, D., Shleifer, A., Goldman, M. I., & Weitzman, M. L. (1997). The Unofficial Economy in Transition. Brookings Papers on Economic Activity, 1997(2), 159. doi:10.2307/2534688
53. Johnson C. (2017). Engaging Democracy: An Institutional Theory of Participatory Budgeting, A dissertation for the degree of Doctor of Philosophy, University of Washington
54. Justice, J.B., Melitski, J., Smith D.L. (2006). E-Government as an Instrument of Fiscal Accountability and Responsiveness: Do the Best Practitioners Employ the Best Practices? The American Review of Public Administration, 36(3), 301-322
55. Kaufmann, D. (1997). Corruption: the Facts, Foreign Policy. 107: 114–131.
56. Khan M.A. (2005), “Engaged Governance’ and Citizen Participation in Pro-Poor Budgeting”, p.3-18, Citizen Participation and Pro-poor Budgeting, Department of Economic and Social Affairs, United Nations, New York
57. Kim, S., Kim, H. J., & Lee, H. (2009). An institutional analysis of an e-government system for anti-corruption: The case of OPEN. Government Information Quarterly, 26(1), 42-50. doi.org/10.1016/j.giq.2008.09.002
58. Lederman, D., Loayza, N.V., Soares, R.R. (2005). Accountability and Corruption: Political Institutions Matter, Economics&Politics, 0954-1985, 17.
59. Matsusaka, J. G. (2005). The eclipse of legislatures: Direct democracy in the 21st century. Public Choice, 124(1-2), 157-177. https://doi.org/10.1007/s11127-005-4760-1
60. Mauro, P. (1995). Corruption and Growth, The Quarterly Journal of Economics, Volume 110, Issue 3, August 1995, Pages 681–712, https://doi.org/10.2307/2946696
61. Mauro, P. (1996). The Effects of Corruption on Growth, Investment, and Government Expenditure (September 1996). IMF Working Paper No. 96/98
62. Mauro, P. (1997). "The Effects of Corruption on Growth, Investment, and Government Expenditure: A Cross-Country Analysis." In Kimberly Ann Elliot (ed.), Corruption and the Global Economy, Washington D.C.: Institute for International Economics, pp. 83-107.
63. Mauro, P. (1998). Corruption and the Composition of Government Expenditure. Journal of Public Economics, 69, 263-279. https://doi.org/10.1016/S0047-2727(98)00025-5
64. Mistry, J. J., & Jalal, A. (2012). An empirical analysis of the relationship between e-government and corruption. International Journal of Digital Accounting Research, 12.
65. Ndou, V. (2004). E–Government for developing countries: opportunities and challenges. The Electronic Journal of Information Systems In Developing Countries, 18(1), 1-24.
66. Neshkova, M.I., & Guo, H. (2012). Public Participation and Organizational Performance: Evidence from State Agencies. Journal of Public Administration Research and Theory, 22, 267-288.
67. Nye, J. (1967). Corruption and Political Development: A Cost-Benefit Analysis. American Political Science Review, 61(2), 417-427. doi:10.2307/1953254
68. OECD (2001). Citizens as Partners OECD Handbook on Information, Consultation and Public Participation in Policy-Making, Drafted by Marc Gramberger, Paris
69. OECD (2017a). Public Governance Scan-Chile, Report on The Citizen Participation in the Constiturional Process
70. OECD (2017b). Budget Transparency Toolkit, Practical steps for supporting openness, integrity and accountability in Public Financial Management
71. Olken, B. A. (2007). Monitoring Corruption: Evidence from a Field Experiment in Indonesia. Journal of Political Economy, 115(2), 200–249. doi:10.1086/517935
72. Othman R. (2012). Budgetary Participation: How it Affects Performance and Commitment, Accountancy Business and the Public Interest, New Zealand
73. Pelizzo, R., Stanpenhurst, F. (2014), Corruption and Legislature. USA: Routledge
74. Pellegrini, L., & Gerlagh, R. (2004). Corruption’s Effect on Growth and its Transmission Channels. Kyklos, 57(3), 429–456. doi:10.1111/j.0023-5962.2004.00261.x
75. Persson, Anna & Rothstein, Bo & Teorell, Jan. (2013). Why Anti-Corruption Reforms Fail—Systemic Corruption as a Collective Action Problem. Governance. 26(3), 449-471. 10.1111/j.1468-0491.2012.01604.x.
76. Purohit M. (2007). “Corruption in Tax Administration” p. 285-302, Edited by Shah, A. (2007). Performance accountability and combating corruption. The World Bank.
77. Roberts N. (2004). Public Deliberation in an Age of Direct Citizen Participation. American Review of Public Administration 34 ( 4 ): 315–353
78. Russel-Einhorn, M. (2007). “Legal and Institutional Frameworks Supporting Accountability in Budgeting and Service Delivery Performans”, 183-232, Anwar Shah, Performance Accountability and Combating Corruption. Washington: The World Bank,
79. Samuel, M., Okey, L.E. (2015). The Relevance and Significance of Correlation in Social Science Research, International Journal of Sociology and Anthropology Research, 1(3), 22-28. Published by European Centre for Research Training and Development UK (www.eajournals.org).
80. Schmitt C. (2006). Parlamenter Demokrasinin Krizi, Çeviren: Zeybekoğlu A.E., Dost Kitabevi, Ankara Seifert, J., Carlitz, R., & Mondo, E. (2013). The Open Budget Index (OBI) as a comparative statistical tool. Journal of Comparative Policy Analysis: Research and Practice, 15(1), 87-101. doi.org/10.1080/13876988.2012.748586
81. Shall A.(2007). Participatory Budgeting in the Middle East and North Africa, p.191-224, Edited by Anwar Shah, The International Bank for Reconstruction and Development / The World Bank, NY Shah A. (2007). Participatory Budgeting, Edited by Anwar Shah, The International Bank for Reconstruction and Development / The World Bank, NY
82. Shapiro, S.P. (2005). Agency theory. Annual Review of Sociology. 31 (1), 263-284
83. Shim D. C., Eom T. H (2008). E-Government and Anti-Corruption: Empirical, Analysis of International Data, Intl Journal of Public Administration, 31: 298–316, 2008 DOI: 10.1080/01900690701590553
84. Shleifer A., Vishny R. W. (1993). Corruption, The Quarterly Journal of Economics, Volume 108, Issue 3, August 1993, Pages 599–617, https://doi.org/10.2307/2118402
85. Smith, R.W. and Bertozzi, M. (1996). "Principals and agents: an explanatory model for public budgeting", Journal of Public Budgeting, Accounting & Financial Management, Vol. 10 No. 3, pp. 325-353. https://doi.org/10.1108/JPBAFM-10-03-1998-B001
86. Souza, C. (2001). Participatory budgeting in Brazilian cities: limits and possibilities in building democratic institutions. Environment and Urbanization, 13(1), 159–184. https://doi.org/10.1177/095624780101300112
87. Tanzi, V. and Davoodi H. (1997). Corruption, Public Investment, and Growth. IMF Working Paper. WP/97/139
88. Tanzi, V. (1998a). “Corruption around the world: Causes, consequences, scope, and cures”, Washington D.C.: IMF Working Paper 98/63.
89. Tanzi V. (1998b). Corruption and the Budget: Problems and Solutions. In: Jain A.K. (eds) Economics of Corruption. Recent Economic Thought Series, vol 65. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-4935-2_6
90. Tanzi, V., & Schuknecht, L. (2000). Public spending in the 20th century: A global perspective. Cambridge University Press.
91. Tanzi V. (2002) “Corruption Around the World: Causes, Consequences, Scope, and Cures”, p.19-58, Governance, corruption, and economic performance I editors, George T. Abed, Sanjeev Gupta-Washington, D.C.
92. TI (2019), Corruption Perception Index 2019, (Access: August 25, 2020: https://images.transparencycdn.org/images/2019_CPI_Report_EN_200331_141425.pdf)
93. Timmons, J. F., & Garfias, F. (2015). Revealed Corruption, Taxation, and Fiscal Accountability: Evidence from Brazil. World Development, 70, 13-27. doi:10.1016/j.worlddev.2014.12.011
94. UNDP and UNODC (2018).“Anti-corruption contribution to accelerate progress on the 2030 Agenda for Sustainable Development” at the 18th International Anti-Corruption Conference (Copenhagen, Denmark, 22-24 October 2018).
95. Wampler B. (2000). A Guide to Participatory Budgeting (https://www.partizipation.at/fileadmin/media_data/Downloads/themen/A_guide_to_PB.pdf, Erişim:09.03.2019)
96. Wampler B. (2007a). “Extending Citizenship and Accountability Through Participatory Budgeting” p.1-44, Participatory Budgeting in Brazil, Contestation, Cooperation, and Accountability, The Pennsylvania State University Press, University Park, PA
97. Wampler B. (2007b). Participatory Budgeting in Brazil, Contestation, Cooperation, and Accountability, The Pennsylvania State University Press, USA
98. Wampler B., McNulty S., Touchen M. (2018). “The Global Spread and Transformation of Participatory Budgeting”, p.55-72, Hope For Democracy – 30 Years Of Participatory Budgeting Worldwide, Epopeia Records | Oficina coordination 2018, Nelson Dias
99. World Bank. (1997). World development report 1997: The state in a changing world. The World Bank.
100. World Bank (2011), Trends in Corruption and Regulatory Burden in Eastern Europe and Central Asia, The International Bank for Reconstruction and Development. The World Bank, Washington, DC
101. Welch, E. W., Hinnant, C. C., & Moon, M. J. (2005). Linking Citizen Satisfaction With e-Government And Trust in Government. Journal of Public Administration Research and Theory, 15(3), 371-391.https://doi.org/10.1093/jopart/mui021
102. Wei, S.-J. (2000). How Taxing is Corruption on International Investors? Review of Economics and Statistics, 82(1), 1–11. doi:10.1162/003465300558533
103. Zamboni, Y. (2007). “Participatory Budgeting and Local Governance: An Evidence-Based Evaluation of Participatory Budgeting Experiences in Brazil,” working paper.