Measuring the socio- economical returns
of - Government: lessons from eGEP
First LOG-IN Africa Methodology Workshop,
8 –10 June 2006, Tangier Morocco
Dr. Andrea Gumina, PhD
Project Leader, eGov@luiss - Luiss Business School
Definition of e-Government
eGovernment refers to a deep ICT-enabled transformation process,
which could take place within the Public Sector and with reference to
its relations with stakeholders. Such a process is the outcome of a
correct mix among re-organisation, human capital empowerment and ICT
The main goal of the eGovernment is to act on effectiveness and
efficiency of Public Administrations, while an indirect objective is to
transform the entire corpus of relationship within a Knowledge
Society.To do so, a number of mechanism should be put in place, in
order to assure the diffusion of the induced innovation and technical
progress at all levels.
It stems from this, that a number of activities should be put in place by
Public Sector: some are regulatory, some others refers to policy issues.
They should all purse to make progress generated within the Public
Sector, real and lasting at a Society-level.
As a result, eGovernment should act as a multiplier on productivity and
growth, becoming a powerful driver for socio-economic development.
Measuring the main aims
of LOG-IN Africa
Three issues of LOG-IN Africa seem to imply a measurement effort:
It will assess the current state and outcomes of e-local governance
initiatives in Africa, and in particular how ICTs are being used to realize
good local governance at four levels: a) the internal organizational processes
of local governments; b) the provision of information and service delivery; c)
the promotion of the principles of good governance; and d) public
participation and consultation.
It will generate modular “outcome assessment framework”, with specific
indicators linked to a conceptual framing of the characteristics of “good
governance”, will be developed.
Finally, the Network will generate research findings contributing to more
effective policy making and implementation in e-local governance in Africa.
Main fields to measure refers to socio-economic impact of
eGovernment, as well as to the investment returns of the investment
made / to be made
A Socio-Economic View of e-Government
makes measurement mandatory
Scarce financial resources, needs to be
effective in policy making and to
produce value for stakeholders, make
measurement and monitoring activities
Furthermore, they are going to be
considered as investments themselves,
rather than as expenses.
The eGEP Model: basic tenets
Take-up Investment Led
∧ ∧ ∧ ∧
π PS ,t = b Y PS + cW PS ,t − n − P egov ,t − n + d LPS ,t + ASCU t −1 + ASVU t +
∧ ∧ ∧ ∧
∧ ∧ ∧
+ e E hw,t − jn + E sw,t − jn + E cp ,t − jn + E tp ,t − jn + f (ht + rs + li )t
Measurable side of
Combined Increase in Increasein
efficiency- pub. sect. pub. sect.
effectiveness: productivity Share of GDP
eGOV •Increased output
investments •New Services GDP
Take up &
eGovernment leads to increased public sector labour productivity,
which in turn, contributes to a number of intermediate outcomes
(better services, cost savings, etc), and to GDP growth
The “Smith’s Effect”
In the private context, the “Smith effect” takes into
account how the growth of market/specific sector
influences the labour productivity.
The adaptation to the Public Sector is based on the
assumption that the introduction of eGovernment
increases the supply capacity of the Public Sector and
that all services produced are also demanded by users.
The “Ricardo’s Effect”
In the private context, the “Ricardo’s effect” shows how an
increase in the spread between wages and the price of
technology (machines) pushes businesses to gain productivity,
through a substitution process between technology and
The adaptation to the public sector implies a reformulation:
when the cost of innovation compared with that of personnel
decreases, it can be efficient to partially substitute and
partially integrate the latter with a wide implementation of
The “Schumpeter’s Effect”
The characteristic element of this component is the
consideration of ICT investments and related
aspects: consulting, training, hardware, software,
The impact of such innovations (as new innovations replace
the older ones) generate an increases in productivity,
after a time lag
Back-office reorganisation effect is connected to the
difference between the cost of delivering a given
service and its perceived value. If this cost grows, it is
necessary to modify the delivery organisation
influencing by this way productivity
Take-up effect : the more the social environment is
“receptive” (e.g. because of a wide ICT diffusion, or
because of a broad, deep- r e ervices) the
ooted use of - s
more eGovernment increases public sector productivity
Model testing by macro variables
Economic Model Variables Sources
ALP = Average Labour Productivity output /full-time equivalent employees Eurostat
PS = Public Sector Share general government output as % GDP Eurostat
Y= Market Dimension general government output Eurostat
W = Cost of staff general govt. employees compensation Eurostat
K = Cost of capital equipment price index of gen. govt. goods investments Eurostat
H = Cost of hardware Estimated expenditure
S = Cost of software Estimated expenditure eGEP
C = Cost of consulting Estimated expenditure
T = Cost of Training Estimated expenditure
I= Investment gross fixed capital formation of gen. govt. Eurostat
Two versions tested
Two forms of our model: one based on growth
rates (labelled “A”), and one based on absolute
A. ALP = a + bY + cW + dK+ eI+ fEGOV
B. ALP = a + bY + cW + dK+ eI+ fEGOV
Based on data for 20 countries: Austria, Belgium, Czech Republic, Denmark,
Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands,
Norway,Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, United Kingdom; data
for the period 1999-2005
Results (sign of coefficients)
Effects Variabl Equation Equation “B”
Smith’s Effect Y +* +*
W ++* ++*
K - +
Effect I +* +*
eGOV +* +*
(*) Coefficient significantly different from 0 at 95% confidence level
a) Constant prices variables (Y,I, eGOV) expressed in millions of Euro,
baseline year 2000.
b) Equation “A” was fitted by a Fixed-Effects Panel model (68 observations),
Equation “B” was estimated with the “Arellano-Bond” technique (68
Impact of eGovernement on Average Labour Productivity (ALP)
2005 2006 2007 2008 2009 2010
Graph 2.1 Projected GDP growth
EU-25 GDP growth
2005 2006 2007 2008 2009 2010
dGDP B dGDP A (with e-Procurement, without
back-office and take-up effect)
Main problems about data
Measuring perfomance recquires fresh and
Data collecting should be easy and cheap for
PAs, in order to be as frequent as possible
Data should be collected and processed with a
strong attention to the local level
Processing methodology should be clear and
agreed among Public Sector’s representatives.
Main findings and policy reccomendations from
the eGEP methodology
Increase both the efficiency and the
effectiveness of eGovernment inside Public
Administrations with reference to their main
stakeholders (policies 1 to 4);
Promote the dissemination of specific tools to
measure performance, together with a favourable
cultural background (policy no. 5);
Set-up a number of complementary policies, in
order to foster the “take-up” effect, and finally
promote productivity and growth.
Policy no. 1:
To share eGovernment goals
Focusing every eGovernment project on front-office as well as
on back-office, paying much attention both to the deployment of
easy-to-use services and to the setting up of productivity-
sensitive policies, such as those for general and specific training
or re-organisational issues.
Promoting a favourable scenario, where social, economic,
financial, legal and institutional issues play a major part in
overall local growth when adequately oriented.
Defining an operational measurement framework, which also
favours the establishment of comparative benchmarking and
Policy no. 2: To guide eGovernment towards
The promotion of a horizontal eGovernment.
A review of eGovernment vertical policies.
Specific principles, linked to technical features.
The promotion of both a user-centred and a locally-aimed eGovernment. Due
to budget constraints, eGovernment policies should not be oriented only to local
growth, but should also take into account user needs. As a consequence, further
implementation should be based upon a number of subjective and objective
priorities, combining the need to satisfy user needs and the opportunity of
realising programmes which refer to the true needs and potential of local areas,
such as macroeconomic entities. This would lead to a progressive deployment of
eGovernment projects, following different priorities in different areas, maybe
not homogeneous, thus giving measurement, monitoring and fine tuning activities
a sharper and more effective meaning, in the light of promoting sustainable and
lasting local growth.
The promotion of specialisation within the Public Sector. Horizontal and
pervasive eGovernment should benefit from a higher degree of local
specialisation within different branches of Public Administration (if accompanied
by perfect interoperability), rather than from an indiscriminate upgrade of
organisational issues within the entire Public Sector. However, in general, the
size of single may find it more useful to identify and promote such economies
internally, smaller administrations may find outsourcing to be a smarter and
more suitable solution.
Policy no. 3: To favour a performance-
friendly environment within the Public Sector
Accelerating the shift from evaluation to performance rewarding.
Together with a mandatory measurement approach, performance should
be linked to a “prizes and penalties” mechanism. Public Administrations
do not have strong incentives to set particularly ambitious objectives
and to try to achieve them. This could lead to vicious circles: an adverse
selection mechanism could take place, where establishing goals that are
too ambitious could mean risking not reaching them. The only way to
break these vicious circles is to ensure strong financial and career
incentives linked to performance for both personnel and public
Working against motivational crowding out.
Fostering the adoption of reforms that encourage performance
measurement. Finally, such a framework requires regulatory and
legislative ad hoc reform promotion: this refers, for instance, not only
to the above-mentioned “prize and penalty” mechanism, but also to
guaranteeing mandatory performance measurement, and linking
legitimisation of policy makers’ decisions to e-democracy tools.
Policy no.4: To create a friendly
financial framework for eGovernment
Let Administrations invest, if useful.
Reward the best Administrations and
Invest Cost Savings.
Policy no. 5: To make performance
Define a homogeneous road-map. The entire Public Sector will certainly not increase its
eGovernment readiness unanimously; however, it is necessary to define a clear and
homogeneous road-map for such a complex transformation, with precise features and goals.
Otherwise, the general enhancement of the Public Sector will be poor and eGovernment
could be jeopardized. Moreover, if performance measurement aims to affect the budget
(negatively or positively), more attention should be paid to the definition of a general
Define a clear, homogeneous and simple measurement framework. Measurement tools
should be easy to handle and use, but also as complete and effective as possible, in order to
minimize any “coordination cost” that may arise. Furthermore, as more e-services gradually
become ICT-enabled, the administrative burden to measure use, efficiency and satisfaction
should decrease. In this case, even a limited “measurement effort”, in absolute value, could
be considered a substitute for the introduction of a more advanced eGovernment.
Local matters. We believe that eGovernment will spread its effects on growth and
performance especially at local level, and that the measurement framework should take this
feature into account: an adequate observation scale should be achieved (i.e., NUTS3 areas).
Indeed, internal measures could be aggregated in order to allow a comparison with external
effects: this is a must when a prize/penalty framework is to be set up.
Measure the effort and the gap. History matters, especially if budgetary cuts or gains
depend on performance measurement. In this light, it becomes compulsory not only to take
into account the effort and the results, measuring the period-by-period differences, but
also to bear in mind the remaining gap and the absolute values of such efforts. Otherwise,
the observation of political and administrative commitment may be distorted.