**<u>Table 1. Total Budget Expenditure in</u>** **_<u>Soums</u>_** **<u>and</u>** **_<u>Aimags</u>_** **<u>(percent)</u>**

|**Types of expenditure**|**Khishing-**<br>**Undur**|**Baruuturuun**|**Average**<br>**Soums***|**Average**<br>**Aimag****|
|---|---|---|---|---|
|**CURRENT EXPENDITURE**|**100.0**|**100.0**|**100.0**|**95.6**|
|**1. Goods and services**|**100.0**|**100.0**|**100.0**|**93.7**|
|_a. Wages and salaries_|40.8|53.8|47.3|41.4|
|_b. Social security contributions_|9.7|14.3|12.0|10.3|
|_c. Purchase of goods and service_|49.5|31.8|40.7|41.9|
|**2. Subsidies and transfers**|**0**|**0**|**0**|**2.0**|
|**CAPITAL EXPENDITURE**|**0**|**0**|**0**|**4.4**|
|**TOTAL EXPENDITURE**|**100.0**|**100.0**|**100.0**|**100.0**|

Source: Own, based on CMM (2005). *Soums are the lowest formal tier of government. Soum data is for 2003. ** Aimags are intermediate-level governments. Aimag data corresponds to the 2002-2004 average for the aimgs of Bulgan, Uvs, Khentii, Dundgobi With high levels of current spending, the power of citizens to influence local budget allocations depends largely on the size of the capital budget –and just marginally on those non-wage parts of current expenditures over which citizens could have some kind of power. In the participatory budgeting process in Brazil, for example, citizens’ voice over budget allocations is restricted to the decisions on infrastructure investment. According to this rationale, a high proportion of capital spending should be positively associated with the level of local participation. Although this association still needs to be tested, there is already evidence in its favor. Souza (2001) found that when municipalities do not have to devote large portions of their budgets to cover basic education expenditures, they free up resources to introduce innovative policies like participatory budgeting. Similarly, another quantitative study found a positive and significant relationship between high proportions of capital expenditure in municipalities’ total expenditure and the likelihood that participatory budgeting is implemented (Baiocchi et al. 2005). However, the causality of the association between budget size and availability of participatory mechanism and processes remains to be empirically tested. It is not yet clear if such mechanisms and process exist because budgets are large, or if the fact that budgets are large call for the creation of such mechanisms.

**_2.2.3. Budget transparency:_** The overall level of transparency in which local budgets are formulated, executed, and evaluated is another factor related to the empowering effect of participatory budgeting.<sup>15</sup> Transparency is crucial because even if budgets are large and flexible, unless they are decided, allocated, and monitored in a transparent fashion, citizens will not have the information to make effective choices. Availability of information is actually a crucial determinant of both accountability and citizens’ participation. For example, a WBI (2003) study found that in Latin America access to information on the origin and the object of local resources, increases citizens’ trust, which is a basis of civic

> 15 Transparency has been extensively recognized as a central piece of good governance in budgetary practices. A wide range of international (IMF, WB, UN) and non-governmental organizations have been supportive of transparency for the last few years. There are several important initiatives for budget transparency that have been carried out in many parts of the world. For a brief review of these efforts see Norton and Elson (2002).

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