E-Government, Financial Development and Economic Growth

Abstract

The growing importance of e-government and financial development has captured the attention of policy makers who are determined to enhance the per capita income of a country. This study aims to present new findings of the impacts of e-government and financial development on economic growth, using a cross sectional multi-year average dataset of 147 economies across the globe. To the best of the knowledge of authors, this is the first empirical research work which determines relationship between the economic growth and e-government, with particular focus on the role of financial development in shaping this relationship. The possible problem of endogeneity using both the internal and external instruments is also addressed in this study. Empirical findings suggest that growth impact of e-government is positive and significant while the direct growth impact of financial development turns out to be insignificant. However, the positive impact of financial development is explained thorough implementation of e-government as interactive term of financial development and the e-government which turns out to be positive and significant in all regressions. Findings of this study are not sensitive to control additional variables. The study concludes that economies of the world can significantly benefit from financial development if satisfactory quality of e-government can be assured.