Financing digital government in municipalities: An economic perspective

The purpose of local governments is to facilitate the well-being of communities and regions. Through the provision of different public goods and services local governments have the mission to provide security and stable conditions for individuals and firms by ensuring the necessary public infrastructure and amenities for their activities in the region, such as water supply, roads, waste disposal, parks, schools, and other public functions decentralized in the case of federal systems, among others. Many of these public goods and services are ICT-enabled, and therefore are included within the local digital government strategy. This is the context of digital government initiatives in municipal governments. The critical question for any local government in terms of digital government initiatives is how should they be provided and financed? Assessing this question of whether these ICT-enabled goods and services related to digital government might be more likely to be provided and funded, this article propose a model that embraces the concepts of public good and externalities from the economic perspective in order to provide a useful basis for developing a framework for financing digital government. This article describes a proposal for this framework based on these concepts and applies it in the case of several digital government initiatives undertaken by the City of Aguascalientes, Mexico. This framework applies to local as well as state and national levels of governments. Implications for research and practice are discussed.