Inclusive GovTech: Enhancing Efficiency and Equity Through Public Service Digitalization

IMF Working Papers, October 27, 2023

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Introduction of digital budget payments and e-procurement could significantly enhance budget transparency.
Digital budget payments and e-procurement can help expand the coverage of social assistance to reach the most vulnerable population.
Exploiting staggered adoption of digital budget payments, a synthetic control regression identifies meaningful increase in pre-tax income shares among the bottom 50th percentile and female workers.
Effects are especially pronounced for emerging market and developing countries, with effects materializing gradually over a 10-year period.
Reduction in business informality is identified as a primary channel driving equity benefits.

Primary empirical approaches: event-study method and synthetic control regression.
Identification strategy: exploits staggered adoption of digital budget payments across jurisdictions.

Primary channel for equity gains: reduction in business informality.
Constraints and necessary complements:
- Supporting policies and regulations.
- Organizational and system integration.
- Robust digital connectivity.
- Inter-agency coordination, with a dedicated GovTech institution facilitating coordination, is critical to realize efficiency and equity gains.
Warning: Mere adoption of GovTech strategies or digital technologies is insufficient to unlock full potential without the above complements.

Prioritize inter-agency coordination mechanisms, potentially through a dedicated GovTech institution, to maximize GovTech impact on efficiency and equity.
Pair GovTech adoption with supporting policies, regulations, and organizational/system integration efforts.
Strengthen digital connectivity to ensure inclusive reach of digital budget payments and e-procurement.
Design GovTech implementations with explicit objectives to reduce business informality to capture distributional benefits.