PUBLIC FINANCE AND POLICY EFFECTIVENESS A REVIEW OF PARTICIPATORY BUDGETING IN LOCAL GOVERNANCE SYSTEMS

Abstract

This systematic review explores the role of participatory budgeting (PB) in enhancing public finance systems and improving policy effectiveness within local governance contexts. Drawing upon the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) 2020 framework, this study synthesizes findings from 92 peer-reviewed articles and high-quality institutional reports published between 2000 and 2024. The review investigates how PB contributes to fiscal decentralization, budget transparency, equitable public expenditure, service delivery, social inclusion, and civic engagement. Through a rigorous analysis of empirical and theoretical contributions, the review highlights the multidimensional value of PB in realigning public spending with local needs and promoting democratic accountability. Key findings indicate that PB strengthens the alignment between public resource allocation and community-defined priorities, reduces corruption through participatory oversight mechanisms, and fosters institutional trust by enhancing transparency and inclusiveness. The evidence shows that PB not only empowers marginalized populations—such as women, youth, and ethnic minorities—but also encourages sustained civic learning, social cohesion, and citizen-state collaboration. However, successful implementation of PB is contingent upon several enabling conditions, including strong political commitment, sufficient administrative capacity, legal frameworks that institutionalize participatory practices, and the presence of an active and organized civil society. Comparative analysis across Latin America, Europe, Africa, Asia, and North America reveals that while PB principles are globally adaptable, their effectiveness varies depending on local political culture, institutional maturity, and infrastructural readiness. The review also underscores the potential of digital PB platforms in expanding access and participation, though challenges remain regarding inclusivity and the digital divide. Despite promising impacts, the review identifies notable research gaps, such as the absence of longitudinal impact assessments, limited integration of intersectional frameworks, and the underrepresentation of PB practices in fragile, post-conflict, or authoritarian contexts. Furthermore, most evaluations focus on output measures (e.g., number of projects funded) rather than long-term governance or developmental outcomes. By consolidating diverse strands of literature, this review underscores PB’s transformative potential as both a governance mechanism and a fiscal tool. It calls for more context-sensitive, interdisciplinary research to fully understand PB’s long-term contributions to inclusive development, democratic renewal, and sustainable public finance reform.