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This paper investigates the budget transparency of Croatian local governments, i.e., the relationship between the open local budget index (OLBI) and a set of economic, political and socio--cultural variables. It uses a unique panel database of all 128 cities and 428 municipalities in 2015 and 2016. To examine the differences among the samples and years and to determine whether the different samples have different driving forces, a regression analysis based on a Poisson distribution is used. In the total (cities and municipalities) and city samples, average income per capita (p.c.) is the most important determinant of the OLBI, which confirms Ferejohn's principal-agent model. At the municipality level, the findings indicate that political variables (ideology and political competition) are the factors that play the most important role, which is in line with the principal-agent and legitimacy theories. Findings point out to the necessity of reconsidering the number of local governments, particularly smaller ones lacking the capacity for maintaining basic budget transparency standards and to motivate citizens to demand and local governments to offer more budget transparency.

The overall average level of budget transparency in Croatian counties, cities and municipalities, measured by the number of budget documents published on their respective official websites, stands at 3.52 (out of a possible 5). The number of budget documents published has grown year by year in all types of local government units, averaging 4.9 in counties, 4 in cities and 3.3 in municipalities in this research cycle. For the first time, there are no cities without at least one budget document published, or municipalities without an official website. However, despite the improvements in average results achieved, differences among individual local units, notably municipalities, are still huge. A large number of cities and the bulk of municipalities will have to intensify their efforts to comply with their legal obligations and recommendations of the Ministry of Finance in this respect. While the publishing of budget documents does not in itself guarantee absolute transparency, it should still be prescribed and encouraged, because it is the first step towards achieving higher transparency levels necessary for citizens' participation in the budget process. More detailed results for all counties, cities and municipalities are given later in the text and are available on an interactive map and in an Excel table format. 1 This research was funded by the Croatian Science Foundation (CSC) under the project IP-2014-09-3008. CSC also funded the work of doctoral student Branko Stanić. Opinions, findings, conclusions and recommendations are those of the authors and do not necessarily reflect the views of CSC. The authors gratefully acknowledge Marija Višić for her assitance in data collection. 2 The results for previous cycles were published in the articles by Ott, Bronić and Petrušić (2013, 2014 and 2015), as well as by Ott, Bronić, Petrušić and Stanić (2016 and 2017). 3 Irrespective of the formal distinction among the units of local and regional self-government, for the purposes of this article, the term 'local government units' covers all 20 counties, 128 cities and 428 municipalities.

As a part of the public governance, transparency started to come forward during the New Public Management reforms, mostly for the evaluation of public sector efficiency. This article focuses on online local budget transparency (OLBT) in two neighbouring countries – Croatia and Slovenia. The article is pioneering in a comparative study of the determinants of budget transparency in the Central and Eastern European (CEE) countries, based on a unique database and measure of transparency. The article tests the determinants of OLBT that reflect the accountability of local authorities and a cornerstone for public participation in the budget process. The following methodology was applied: using a data set of 768 Slovenian and Croatian local governments over the 2015–2017 period and testing it against several financial and socio-economic variables, and a random effects panel logistic regression, separately for Croatia, Slovenia, and a pooled sample. The results indicate that greater size of the population, higher administrative capacity and lower unemployment rate in individual local governments significantly contribute to higher levels of OLBT. This study demonstrates the possibility of developing a standardised measure of local budget transparency and using it to investigate the reasons for different levels of transparency in the two – and potentially other – CEE countries. The results of this and similar studies can serve as a basis for establishing cohesive local budget transparency policies for different countries and creating a combination of policy instruments to enhance transparency.

Budget transparency implies having an insight into complete, accurate, timely and understandable budget information. Publishing budgets in a transparent manner allows citizens to contribute to the more efficient collection of public funds and supply of public goods and services, to increase accountability of the Government and local government authorities and thus to reduce opportunities for corruption.For the purposes of this research, budget transparency is measured by the number of key budget documents published on the official websites of Croatian local government units 3 which, in this research cycle, include the following: