Advancing E‐Government: Financing Challenges and Opportunities

As e‐government evolves into the transactions stage, governments must grapple with how to finance the development of e‐transactions. The authors argue that the externalities effects of electronic transactions suggest they are appropriately financed by some combination of public investment and user charges. We propose a self‐financing model adhering to two basic requirements. A flexible pricing framework is the core of the self‐financing model, as it embodies both the firm’s and the government’s perspectives. We assess basic assumptions of the pricing framework using contingent valuation methodology and a statewide survey of more than 400 firms. The empirical estimates we develop of the willingness to pay for e‐transactions with state government and the theoretical discussion about the self‐financing model form the basis for prescribing policy recommendations.