IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v87y2025icp533-560.html

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

Author

Listed:
  • Chen, Xilu
  • Ge, Erqi
  • Xu, Xianxiang
  • Zhou, Quan

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.

Suggested Citation

  • Chen, Xilu & Ge, Erqi & Xu, Xianxiang & Zhou, Quan, 2025. "Does digitalization of government activities improve business environment? The influence of public service standardization," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 533-560.
    • Handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:533-560
    DOI: 10.1016/j.eap.2025.05.034
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592625002000
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eap.2025.05.034?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-392, May.
    2. Divanbeigi,Raian & Ramalho,Rita, 2015. "Business regulations and growth," Policy Research Working Paper Series 7299, The World Bank.
    3. Susan Athey & Emilio Calvano & Joshua S. Gans, 2018. "The Impact of Consumer Multi-homing on Advertising Markets and Media Competition," Management Science, INFORMS, vol. 64(4), pages 1574-1590, April.
    4. Gan, Tian & Zhang, Mingxin & Zhang, Zhiqiang, 2023. "The impact of digital government policy on entrepreneurial activity in China," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 479-496.
    5. Isaiah Andrews & James H. Stock & Liyang Sun, 2019. "Weak Instruments in Instrumental Variables Regression: Theory and Practice," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 727-753, August.
    6. Anna Kochanova & Zahid Hasnain & Bradley Larson, 2020. "Does E-Government Improve Government Capacity? Evidence from Tax Compliance Costs, Tax Revenue, and Public Procurement Competitiveness," The World Bank Economic Review, World Bank, vol. 34(1), pages 101-120.
    7. Geginat, Carolin & Ramalho, Rita, 2018. "Electricity connections and firm performance in 183 countries," Energy Economics, Elsevier, vol. 76(C), pages 344-366.
    8. Timothy Besley & Torsten Persson, 2009. "The Origins of State Capacity: Property Rights, Taxation, and Politics," American Economic Review, American Economic Association, vol. 99(4), pages 1218-1244, September.
    9. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    10. Markus Poschke, 2010. "The Regulation of Entry and Aggregate Productivity," Economic Journal, Royal Economic Society, vol. 120(549), pages 1175-1200, December.
    11. Joseph LiPuma & Scott Newbert & Jonathan Doh, 2013. "The effect of institutional quality on firm export performance in emerging economies: a contingency model of firm age and size," Small Business Economics, Springer, vol. 40(4), pages 817-841, May.
    12. Joseph Lipuma & Scott L. Newbert & Jonathan P. Doh, 2013. "The effect of institutional quality on firm export performance in emerging economies : a contingency model of firm age and size," Post-Print hal-02312662, HAL.
    13. Chris Forman & Avi Goldfarb & Shane Greenstein, 2012. "The Internet and Local Wages: A Puzzle," American Economic Review, American Economic Association, vol. 102(1), pages 556-575, February.
    14. Abhijit Banerjee & Esther Duflo & Clément Imbert & Santhosh Mathew & Rohini Pande, 2020. "E-governance, Accountability, and Leakage in Public Programs: Experimental Evidence from a Financial Management Reform in India," American Economic Journal: Applied Economics, American Economic Association, vol. 12(4), pages 39-72, October.
    15. Mogues, Tewodaj & Van Campenhout, Bjorn & Miehe, Caroline & Kabunga, Nassul, 2023. "The impact of community-based monitoring on public service delivery: A randomized control trial in Uganda," World Development, Elsevier, vol. 172(C).
    16. Daron Acemoglu & David Autor & Jonathon Hazell & Pascual Restrepo, 2022. "Artificial Intelligence and Jobs: Evidence from Online Vacancies," Journal of Labor Economics, University of Chicago Press, vol. 40(S1), pages 293-340.
    17. Timothy Besley & Torsten Persson, 2010. "State Capacity, Conflict, and Development," Econometrica, Econometric Society, vol. 78(1), pages 1-34, January.
    18. Sean Lewis-Faupel & Yusuf Neggers & Benjamin A. Olken & Rohini Pande, 2016. "Can Electronic Procurement Improve Infrastructure Provision? Evidence from Public Works in India and Indonesia," American Economic Journal: Economic Policy, American Economic Association, vol. 8(3), pages 258-283, August.
    19. Berkowitz, Daniel & Lin, Chen & Ma, Yue, 2015. "Do property rights matter? Evidence from a property law enactment," Journal of Financial Economics, Elsevier, vol. 116(3), pages 583-593.
    20. Oyebola Okunogbe & Gabriel Tourek, 2024. "How Can Lower-Income Countries Collect More Taxes? The Role of Technology, Tax Agents, and Politics," Journal of Economic Perspectives, American Economic Association, vol. 38(1), pages 81-106, Winter.
    21. Karthik Muralidharan & Paul Niehaus & Sandip Sukhtankar, 2016. "Building State Capacity: Evidence from Biometric Smartcards in India," American Economic Review, American Economic Association, vol. 106(10), pages 2895-2929, October.
    22. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    23. David H. Autor & David Dorn & Gordon H. Hanson, 2015. "Untangling Trade and Technology: Evidence from Local Labour Markets," Economic Journal, Royal Economic Society, vol. 0(584), pages 621-646, May.
    24. Aurélien Buffat, 2015. "Street-Level Bureaucracy and E-Government," Public Management Review, Taylor & Francis Journals, vol. 17(1), pages 149-161, January.
    25. Jan Van Bavel & David S. Reher, 2013. "The Baby Boom and Its Causes: What We Know and What We Need to Know," Population and Development Review, The Population Council, Inc., vol. 39(2), pages 257-288, June.
    26. João Martins & Linda Veiga & Bruno Fernandes, 2023. "Are electronic government innovations helpful to deter corruption? Evidence from across the world," Economics and Politics, Wiley Blackwell, vol. 35(3), pages 1177-1203, November.
    27. World Bank, 2020. "Doing Business 2020," World Bank Publications - Books, The World Bank Group, number 32436, April.
    28. Wannasiri Bhuasiri & Hangjung Zo & Hwansoo Lee & Andrew P. Ciganek, 2016. "User Acceptance of e-government Services: Examining an e-tax Filing and Payment System in Thailand," Information Technology for Development, Taylor & Francis Journals, vol. 22(4), pages 672-695, October.
    29. Shao, Cuiying & Liu, Zhanyu, 2024. "Advancing green innovation through the establishment of data regulatory bodies: Insights from the Big Data Bureau in China," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 308-325.
    30. Elbahnasawy, Nasr G., 2021. "Can e-government limit the scope of the informal economy?," World Development, Elsevier, vol. 139(C).
    31. Martins, João & Veiga, Linda Gonçalves, 2022. "Digital government as a business facilitator," Information Economics and Policy, Elsevier, vol. 60(C).
    32. Daron Acemoglu & Pascual Restrepo, 2022. "Demographics and Automation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(1), pages 1-44.
    33. Bellon, Matthieu & Dabla-Norris, Era & Khalid, Salma & Lima, Frederico, 2022. "Digitalization to improve tax compliance: Evidence from VAT e-Invoicing in Peru," Journal of Public Economics, Elsevier, vol. 210(C).
    34. Andrea Prat & Tommaso Valletti, 2022. "Attention Oligopoly," American Economic Journal: Microeconomics, American Economic Association, vol. 14(3), pages 530-557, August.
    35. Nicholas Bloom & Luis Garicano & Raffaella Sadun & John Van Reenen, 2014. "The Distinct Effects of Information Technology and Communication Technology on Firm Organization," Management Science, INFORMS, vol. 60(12), pages 2859-2885, December.
    36. Das, Satadru & Gadenne, Lucie & Nandi, Tushar & Warwick, Ross, 2023. "Does going cashless make you tax-rich? Evidence from India’s demonetization experiment," Journal of Public Economics, Elsevier, vol. 224(C).
    37. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    38. Haseeb, Muhammad & Vyborny, Kate, 2022. "Data, discretion and institutional capacity: Evidence from cash transfers in Pakistan," Journal of Public Economics, Elsevier, vol. 206(C).
    39. He, Pinglin & Ma, Yihan & Yin, Mingze, 2025. "Impact of the business environment on national innovation capacity – Empirical study based on OECD countries," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 169-185.
    40. Ding, Zifang & Qu, Shen & Zhou, Shangyao & Lu, Siran, 2024. "Digital government and corporate leverage: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 83(C), pages 457-479.
    41. Filiou, Despoina & Kesidou, Effie & Wu, Lichao, 2023. "Are smart cities green? The role of environmental and digital policies for Eco-innovation in China," World Development, Elsevier, vol. 165(C).
    42. Berthold Herrendorf & Arilton Teixeira, 2011. "Barriers To Entry And Development," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 573-602, May.
    43. Lee Branstetter & Francisco Lima & Lowell J. Taylor & Ana Venâncio, 2014. "Do Entry Regulations Deter Entrepreneurship and Job Creation? Evidence from Recent Reforms in Portugal," Economic Journal, Royal Economic Society, vol. 124(577), pages 805-832, June.
    44. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, vol. 82(3), pages 591-629, December.
    45. Giovanni Mastrobuoni, 2020. "Crime is Terribly Revealing: Information Technology and Police Productivity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(6), pages 2727-2753.
    46. Adnan Khan & Guo Xu & Robin Burgess & Timothy Besley, 2022. "Bureaucracy and Development," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 397-424, August.
    47. World Bank, "undated". "Doing Business in Malaysia 2020," World Bank Publications - Reports 33651, The World Bank Group.
    48. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2019. "Democracy Does Cause Growth," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 47-100.
    49. Dokyun Lee & Kartik Hosanagar, 2021. "How Do Product Attributes and Reviews Moderate the Impact of Recommender Systems Through Purchase Stages?," Management Science, INFORMS, vol. 67(1), pages 524-546, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Okunogbe,Oyebola Motunrayo & Santoro,Fabrizio, 2021. "The Promise and Limitations of Information Technology for Tax Mobilization," Policy Research Working Paper Series 9848, The World Bank.
    2. Mendoza, Ronald U. & Canare, Tristan A. & Ang, Alvin, 2015. "Doing Business: A Review of Literature and Its Role in APEC 2015," Research Paper Series DP 2015-37, Philippine Institute for Development Studies.
    3. Ang, Alvin & Mendoza, Ronald U. & Canare, Tristan A., 2015. "Doing Business: A Review of Literature and Its Role in APEC 2015," Discussion Papers DP 2015-37, Philippine Institute for Development Studies.
    4. Andrew Dustan & Stanislao Maldonado & Juan Manuel Hernandez-Agramonte, 2018. "Motivating bureaucrats with non-monetary incentives when state capacity is weak: Evidence from large-scale field experiments in Peru," Working Papers 136, Peruvian Economic Association.
    5. Kim, Galileu & Kumar, Tanu & Ramalho, Rita & Russell, Stuart Ehrlich, 2026. "Institutional Capacity for Policy Implementation : An Analytical Framework," Policy Research Working Paper Series 11279, The World Bank.
    6. Andrew Dustan & Juan Manuel Hernandez-Agramonte & Stanislao Maldonado, 2018. "Motivating bureaucrats with non-monetary incentives when state capacity is weak: Evidence from large-scale," Natural Field Experiments 00664, The Field Experiments Website.
    7. Beck, T.H.L., 2010. "Legal Institutions and Economic Development," Other publications TiSEM 8aa07b48-ce55-4cf6-8754-7, Tilburg University, School of Economics and Management.
    8. von Haldenwang, Christian, 2020. "Digitalising the fiscal contract: An interdisciplinary framework for empirical inquiry," IDOS Discussion Papers 20/2020, German Institute of Development and Sustainability (IDOS).
    9. Cristian Barra & Nazzareno Ruggiero, 2023. "Quality of Government and Types of Innovation—Empirical Evidence for Italian Manufacturing Firms," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(2), pages 1749-1789, June.
    10. Martins, João & Veiga, Linda Gonçalves, 2022. "Digital government as a business facilitator," Information Economics and Policy, Elsevier, vol. 60(C).
    11. Annalisa Frigo & Sauro Mocetti, 2025. "The effects of digitalization on the functioning of the public sector: evidence from e-procurement," Questioni di Economia e Finanza (Occasional Papers) 938, Bank of Italy, Economic Research and International Relations Area.
    12. Tristan Canare, 2018. "The Effect of Ease of Doing Business on Firm Creation," Annals of Economics and Finance, Society for AEF, vol. 19(2), pages 555-584, November.
    13. Vahagn Jerbashian & Anna Kochanova, 2016. "The impact of doing business regulations on investments in ICT," Empirical Economics, Springer, vol. 50(3), pages 991-1008, May.
    14. Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2016. "Why Can Modern Governments Tax So Much? An Agency Model of Firms as Fiscal Intermediaries," Economica, London School of Economics and Political Science, vol. 83(330), pages 219-246, April.
    15. Amit Nandan & Hrushikesh Mallick, 2022. "Do growth-promoting factors induce income inequality in a transitioning large developing economy? An empirical evidence from Indian states," Economic Change and Restructuring, Springer, vol. 55(2), pages 1109-1139, May.
    16. Silve, Arthur & Verdier, Thierry, 2018. "A theory of regional conflict complexes," Journal of Development Economics, Elsevier, vol. 133(C), pages 434-447.
    17. Afonso, Oscar, 2012. "The impact of public goods and services and public R&D on the non-observed economy size, wages inequality and growth," Economic Modelling, Elsevier, vol. 29(5), pages 1996-2004.
    18. Ali Merima & Shifa Abdulaziz B. & Shimeles Abebe & Woldeyes Firew, 2017. "Working Paper 290 - Building Fiscal Capacity The role of ICT," Working Paper Series 2404, African Development Bank.
    19. Merima Ali & Abdulaziz B. Shifa & Abebe Shimeles & Firew Woldeyes, 2021. "Building Fiscal Capacity in Developing Countries: Evidence on the Role of Information Technology," National Tax Journal, University of Chicago Press, vol. 74(3), pages 591-620.
    20. Mitton, Todd, 2008. "Institutions and concentration," Journal of Development Economics, Elsevier, vol. 86(2), pages 367-394, June.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:533-560. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.