Digital capacity in Brazilian municipalities: fiscal autonomy, bureaucratic structure and heterogeneity

Over the past decades, digital transformation has become a central aspect of state modernization. In this article, we treat this process as a form of state capacity building — specifically, of the digital capacity of the state. Our aim is to assess whether, at the municipal level, fiscal capacity and bureaucratic quality account for higher levels of digital capacity. To this end, we adapt to the municipal context a concept originally formulated for national states and construct the Municipal Digital Capacity Index (ICDM), a novel and comprehensive measure built from the seven waves of the Brazilian Survey of Basic Municipal Information (MUNIC) that include an information and communication technology module between 2004 and 2024, covering virtually all Brazilian municipalities in each wave. Using the ICDM as the dependent variable, we estimate panel models designed to recover between-municipality effects. Fiscal autonomy is the strongest determinant of digital capacity, with a magnitude far exceeding that of bureaucratic attributes, whose effects are positive but modest. None of these effects, however, operates uniformly: own-source revenue yields more in low-income municipalities, staff qualification pays off only where there is organizational structure to absorb it, and the share of politically appointed staff, whose average effect is null, is positive in poorer municipalities and negative in wealthier ones.