The Economics of E-Government Services Are Far From Simple

When constituents serve themselves online, government agencies can offer more services at less expense -- at least that’s the theory. And it’s an appealing one in this budget-slashing era as governments impose furloughs, cut staff and reduce office hours. The next logical step, it would seem, is to give citizens incentives to skip the service counters and use e-government portals instead. Some governments do.

In Virginia, for example, renewing a one-year vehicle registration online costs $1 less than renewing in person or by mail. In truth, however, the financial implications of e-government are far more complex than they appear. Online services may save a government money and can even create new revenue streams -- but they also may generate new costs. And while some governments reward citizens for choosing the self-service option, others charge more for online payments.