Digitizing Bureaucracy

Policy Context

Worldwide, governments are investing in digital technologies to improve administrative efficiency. Yet, despite growing evidence of digitization’s broad economic effects, little is known about how digitizing bureaucratic decision-making affects firms, particularly small and medium-sized enterprises (SMEs) that rely on timely government contracts and payments. In Ghana, as in many developing countries, state and local governments regularly contract out infrastructure and development projects to SMEs. The efficiency of these contracts, from approval to payment, depends critically on the underlying bureaucratic processes. Delays in project approvals and payments constrain firms’ working capital and growth, while enhanced digital systems could alleviate these frictions. This project examines how digital administrative technologies can improve the capacity of local governments and reduce the contracting frictions that constrain firms. Partnering with Ghana’s Ministry of Local Government, the regulator of all Local Government Assemblies, and its technology solutions provider, the project designs and evaluates a digital platform aimed at reducing bureaucratic bottlenecks, improving coordination, and expediting payments for government-to-firm contracts. The central question is: to what extent do bureaucratic frictions in contracting constrain firm growth and the performance of public officials, and through what mechanisms?

Study Design

In collaboration with Ghana’s Ministry of Local Government, the project randomly assigns a large pool of firm-linked, government-procured projects across multiple Local Government Assemblies to one of two groups: Treatment, where Assemblies use the new digital technology solution designed to enhance project processing, coordination, and payments; and Control, where Assemblies continue with business as usual operating under the existing manual system. The intervention covers development projects such as feeder roads and mini dams,  primarily located in rural and poorer areas. The project measures a range of outcomes capturing both government and firm performance. First, the focus is on administrative efficiency, processing times, payment speeds, and coordination effectiveness. Second, firm outcomes are examined, including growth, project completion, working capital constraints, and the composition of firms. Third, to capture broader public-sector performance, the project tracks absenteeism and supervision quality of public officers, performance evaluations by supervisors, and total number and value of projects processed by Assemblies. Bribery and corruption, a key outcome, are also measured through both direct elicitation and garbled response techniques to ensure credible reporting.

Results and Policy Lessons

Results are forthcoming.