Effect of transparency on municipal revenues and expenditures in Spain

Abstract

Transparency is fundamental for the efficient management of government finances. This paper examines the connection between revenues, expenditures and the level of transparency of Spanish municipalities. A panel data methodology, the Juodis, Karavias and Sarafidis causality test and a mixture of ANOVA/linear dependent Dirichlet process are used. The results show a positive impact of unemployment and direct taxes on the transparency index. There is a bidirectional causality between direct taxes and the transparency index. Transparency has a positive impact on direct taxes and a negative impact on indirect taxes.