Economic and political determinants of Local Government Budget Credibility: A Review of Empirical Evidence

Abstract

This article reviews empirical research on the economic and political determinants of local governments, i.e., cities’ and municipalities’ budget credibility, which refers to deviations of planned local budget revenues and expenditures from actual values. It focuses mainly on papers published in Web of Science or Scopus database journals, including 2024. Research on the determinants of subnational (intermediary) and central or national government levels is not included. Two key observations can be made: (1) the definitions and measuring of dependent variables vary widely, which may give rise to seeming flaws and contradictions in the findings, and (2) there is not enough research on the determinants of budget credibility due to the issue of collecting data on planned budgets at the local level. Despite differences in definitions and measurements, the article accurately assesses the fundamental explanatory variables, highlighting those significantly affecting local budget credibility.