Budget Transparency and Good Governance for Human Development and Citizens’ Well-Being. New Empirical Evidence from the European Union

Abstract

This paper aims to study the synergies between budget transparency (proxied through the Open Budget Index) and good governance (measured through each of the 6 Worldwide Governance Indicators), with overall effects on human development (measured by the Human Development Index). Based on the literature underpinnings, most of the previous studies were based either on the bidirectional analysis of the influences exerted by budget transparency on the 6 pillars of governance, or on studying the relationship between good governance and the development prospects of states. Therefore, our study highlights the influences exercised on the level of human development, documenting the simultaneous causality of our coordinates, within the selected states. The sample includes 14 EU member states, selected according to the availability of reported budget transparency, for the period 2006-2021. The research methodology embeds a three-fold approach that relies on advanced modeling through robust regression models, structural equations modeling and Gaussian Graphical Models. The obtained results suggest that improving governance and human development can help promote budget transparency, and greater budget transparency can support better governance and higher human development by ensuring efficient use of public resources, considering the political factor as well.