Transparency and Accountability: Empirical Results for US States

Abstract

Recent formal models of accountability allow us to make different conditional predictions about how transparency affects voters’ willingness to reelect incumbents and acceptance of higher taxes. We review two models and investigate empirical implications derived from or related to them, using panel data from 1972-2000 for U.S. state budget process transparency, gubernatorial elections, and tax increases in a small structural model. We do not find that budget transparency has a direct effect on incumbent retention, but we do find clear evidence that increased transparency dampens the negative effect of tax increases on retention of incumbent governors. Independent of this, we also find that increased transparency leads to greater fiscal scale. We suggest some possible directions for future models based on our results.