Efficiency gains in public service delivery through information technology in municipalities

According to public management theory and existing research on information technology (IT) value creation in the public sector, governments should actively strive to generate greater public value with IT, and the capability of public service delivery is at the center of this public value. In this study, we focus on efficiency gains in public service delivery through IT in municipal governments. First, we answer the research question: How much euro efficiency is gained in public service delivery by €1 increase in share of IT costs relative to total municipal costs? Second, we focus on contextual effects of these efficiency gains, by analyzing the effects of workforce mean age, workforce age dispersion and training costs. We use data from Dutch municipalities and study these efficiency gains in the period 2014–2018. Our empirical strategy encompasses a two-step procedure combining a stochastic frontier model and ordinary least squares models. Our analysis suggests that share of IT costs relative to total municipal costs (in short: share of IT costs) can explain efficiency in public service delivery by municipalities. Our results indicate that an increase of €1 in favour of share of IT costs leads to a net cost efficiency gain of €1.08. We also show that this effect in efficiency gains diminishes with a higher share of IT costs. Our results also show that workforce mean age, workforce age dispersion and training costs do not influence the relation between share of IT costs and efficiency.