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

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  • 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
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    Keywords

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    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

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