eGEP Economic Model: Final Report on the Benefits, Costs and Financing of eGovernment

The Economic Study aims at assessing the impact of ICT within the Public Sector (PS) to Public Sector itself and to society. In particular, it provides the theoretical underpinning of the tangible elements presented in the Measurement Framework. The basic tenet of our model is that eGovernment programs result into an improvement of labour productivity in PS and, as a consequence, contribute to a number of intermediate outcomes (better services, cost savings, etc), and to the growth of GDP. Indeed, the contribution of PS to GDP can be adequately estimated as equal to the labour productivity of the public sector multiplied by the total number of public sector employees. As eGovernment represents the focus of our investigation, we make a ceteris paribus assumption and consider productivity increases linked only to the introduction of wider forms of eGovernment. Then we estimate PS productivity as a ratio between public sector output and the number of public sector employees. The model considers 5 main channels through which eGovernment projects increase PS productivity: the Market Enlargement or Smith’s Effect, the Substitution or Ricardo’s Effect, the Back-Office Reorganization Effect, the Investments-Led or Schumpeter’s Effect, and Other Take-Up Driven Effects. Given the large share of PS in European countries’ GDP, efficiency in the PAs is an objective per se and a major driver of international competitiveness and economic welfare: the growth of PS productivity is the first channel through which eGovernment enhances GDP growth. Then, two other effects depart from the growth of PS’s productivity: on the one hand, publicly provided goods and services contribute to welfare and are part of a country’s Gross Domestic Product, hence their growth should be accounted in national accounts (the second channel: growth of PS total output). Also, a more efficient public administration contributes directly to the efficiency of the economy as a whole and to the productivity of the Private Sector in particular, by stimulating ...