Women in Politics and Budget Deviations: Evidence from Croatian Cities

Abstract

This paper examines whether the political representation of women influences budget deviations in local governments. Using a panel dataset of 128 Croatian cities from 2016 to 2021, we investigate the impact of female representation in city councils and among mayors on the accuracy of revenue and expenditure forecasts. Applying a dynamic panel model with system GMM estimation, we find a non-linear relationship: a low share of women is linked to more optimistic and less credible budgets, while surpassing a threshold – around 30% for revenues and 40% for expenditures – leads to more fiscally responsible planning. Specifically, cities with greater female representation tend to underestimate revenues and overestimate expenditures, reflecting stronger adherence to fiscal discipline and more cautious budgeting. No statistically significant effect is observed for female mayors. These findings support theories on gendered governance and suggest that increasing the share of women in decision-making roles may improve fiscal performance in local government.

JEL: J16, H71, H72