martes, 11 de febrero de 2014

The need of a measurement framework for #eGov Economy

Although there are few facts to support the idea, it is assumed that eGovernment is a key driver for the Internet Economy. Furthermore, I know of few trials to analyse the eGovernment Economy, or what is the same, the added value of eGovernment to the economic development of a region or country. There are interesting studies that makes partial analysis of the economic impact of eGovernment, generally with the focus on a limited set of services and the economic gains for the public service, but there is neither a holistic approach nor a well established methodology for measuring eGovernment economy in the society as a whole. Nevertheless, as we will see below,the pieces of the jigsaw are on the table.

Reading the OECD last report on measuring Internet economy, I found an interesting departure point for the development of a measurement framework for eGovernment economy. The OECD gives three different methods to calculate the size of Internet economy: Direct impact, Dynamic impact and Indirect impact. In the end, the conclusion is that there is an overlapping between the approaches and the idea that it is quite hard to estimate the real economic impact of Internet in our economy.

The size of Internet Economy, as the OECD document shows, is quite difficult to estimate.

Nevertheless, this should not be a cause for not trying to search for a Framework for the measurement of eGovernment economy. If eGovernment is considered a driver for Internet Economy, one way or the other, it is sure it will be possible to give an estimation of its economic value. As we will see, some pieces of the jigsaw are over the table, and even there are enough hints to think of a bigger value based in other outputs of eGovernment policies. 

Following the model pose in the OECD document for Internet Economy, I initially define eGovernment Economy as the value added to the GNP by eGovernment activities. This definition coincides with the concept of Direct Impact. Afterwards, I will try also to explore how to calculate some economic Indirect and Dynamic Impacts of eGovernment such as the spillover over the economy or the society surplus.

Although I will give enough details to calculate some figures, I will not provide any figure at all, neither for my country nor for any other. That is a matter beyond the scope of this blog and it deserves professional and paid research. I also suspect that some some data will be extremely hard to find.

eGovernment Direct Impact on the Economy

There are two main direct impacts of eGovernment in the economy of a country. On one hand, the value added by the industry activities base of eGovernment development. On the other hand, the value added by eGovernment services. 

The industry activities dedicated to eGoverment comprises the ICT products and services that are used in the development of Government projects. It is quite easy to find for any country the value added per sector, in particular the ICT sector. In the same way, there are enough data provided by the Government or ICT Industry Associations related to the estimated revenue per sector for the ICT industry. Following the same rationale used by the OECD, the same share of revenue obtained from the government by the ICT sector, could be taken as the percentage of value added by the ICT sector activities related with eGovernment. And this way we can obtain the value added to PIB of the development of eGovernment services.

As for the value added by eGovernment services, we can find official figures of the value added by Government activities to the GNP. Unfortunately, what is more difficult to find in all countries is the share of revenues (taxes or charge for services) that governments obtain through electronic means. If we obtain this data, we can apply the same logic, and take as a proxy the percentage of government revenues obtain through electronic means  for the estimation of  the percentage of the value added by governments that comes from eGovernment services.

eGovernment Dynamic Impact

But eGovernment has also an extended impact on the society. As in the case of the Internet, it spreads its impact to the whole sectors of the economy in the form of more efficient relationships. The idea of trying to calculate the economic value of this efficiency improvement was behind the inception of the Standard Cost Model (SCM). This model was accepted by the OECD and adopted by the different countries, each of them including their own peculiarities. Using the SCM and its derivations, it is possible to give an estimation  of the cost of face-to-face transaction for a government service, as well as the cost of its eGovernment version. Taking the two values it is a child game the estimation of the gains obtained using the eGovernment service. 

Although it is complex to apply the method above on a massive scale for all the government services, some efforts and rough estimations have been done in some governments. 

eGovernment spillover on the economy

Indirect impact is hardest to estimate, but it could be done using the Leontiev Input-Output Matrix, that helps us to make an estimation of the spillover of eGovernment activities along the national GDP. To cut a long story short, the idea is that the ouput of an economic activity is the input for other activities, which also contribute to the GDP. If we inject the result of the Direct Impact on the GDP in the Input-Output matrix we will obtain the Indirect impact. Of course, some work should be done to choose which sectors has as an input part of the outputs of eGovernment.


This post is a simple approach to the issue, but it gives an idea why it is so difficult to estimate which is the economic impact of eGovernment in a region or country. Nevertheless, a framework for its measurement is something we badly need. If you have ideas on the issue I would be grateful to receive them.

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