Participatory Budgeting, Corruption and Government Spending on Education - Evidence Based on Panel Data Analysis for Developed and Developing Countries

Since people’s direct participation in processes of deliberative decision-making increases both accountability and people’s influence over governmental policies, we expect that when citizens have more power to decide on policy proposals, they decide for more government spending on education. We also expect that participatory budgeting may be even more important in countries perceived as more corrupt. Hence, the aim of this paper is to investigate whether countries with higher levels of participatory budgeting have larger government spending on education, and whether corruption affects government spending on education. The study is based on a sample of 53 countries (21 developed countries and 32 developing countries) for the period between 1996 and 2014. Based on panel data approach, the estimates are made using the least squares method controlling for fixed effects, and dynamic panel data through the system generalized method of moments. The estimates are made for the total sample as well as for both samples of developed and developing countries. Thus, our study contributes to the literature by providing international evidence on the effects of corruption and participatory budgeting on government spending on education, comparing these effects between developed and developing countries. The results indicate that corruption affects government spending on education. When we compare the results, we observe that the coefficients of corruption are higher in the sample of developed countries. Regarding the effects of participatory budgeting, the findings indicate that in countries where popular participation in the preparation and execution of public policies is greater, the allocation of resources in education also tends to be greater; and this effect is even stronger in developed countries. Moreover, the results indicate that when corruption perception worsens, the effect of participatory budgeting on government spending on education is greater, sustaining the importance of participatory budgeting as an aspect capable of strengthening governance and enforcing society’s preferences.