Does digitalization of government activities improve business environment? The influence of public service standardization

Xilu Chen, Erqi Ge, Xianxiang Xu and Quan Zhou

Economic Analysis and Policy, 2025, vol. 87, issue C, 533-560

Abstract: This study examines how digitalization of government activities improves the business environment. Unlike previous studies that have emphasized transparency, our research examines the role of government’s information and communication technology adoption in establishing standardized procedures for public service provision. Initially, offline services imposed higher costs due to individual discretion. However, the emergence of online platforms introduced clear standards, which prompted offline channels to align with these norms. Consequently, firms are able to access public services at reduced costs, whether online or offline, compared with the pre-digitalization period. We test the predictions of our general equilibrium model using cross-country data from 2003 to 2019. Results from instrumental variable estimations demonstrate that the enhanced scope and quality of online government services have causally improved the business environment, predominantly by reducing firms’ compliance costs, confirming our theoretical model’s predictions. These findings highlight the importance of standardized service delivery for optimizing public service effectiveness.

Keywords: Digitalization of Government activities; Business environment; Public service standardization; Compliance costs (search for similar items in EconPapers)
JEL-codes: D40 D83 H11 H41 O33 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:87:y:2025:i:c:p:533-560

DOI: 10.1016/j.eap.2025.05.034

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