We systematically estimate the causal effects of digital government development on income inequality Initially，we elaborate on the impact of digital government on income inequality through a conceptual quantitative model Specifically，the initial introduction of digital government enhances the standardization and transparency of public service application processes，reducing the costs for firms to access public services The gap among firms in their ability to apply for public services is then narrowed，reducing the inequality in firm profitability Nonetheless，with the progressive maturation of digital government functionalities，some firms may encounter limitations in fully leveraging online public services due to variances in scale，geographical location，human capital，and other determinants，leading to the phenomenon known as the “digital divide，” thus widening income disparities
Using data from 158 economies worldwide from 2007 to 2019，we first employ fixed effects regressions to explore the correlation between digital government development and income inequality However，due to the inherent endogeneity of digital government construction and its close association with the overall economic development level，the fixed effects regressions suffer from bias To address the endogeneities，we further construct instrumental variables for digital government development by interacting with the average historical birth rates between 1950 and 1955 and time trend Our two stage least squares results then show that the influence of digital government follows a Ushaped pattern To be specific，digital government widens income inequality in the top 50% of countries but reduces it in the remaining 50%
We aim to delve deeper into the impact of digital government on income inequality both before and after government redistribution as mechanism explorations We utilize the Gini coefficient based on pretax and pretransfer income data from the SWIID database to gauge income inequality prior to government redistribution Comparative analysis of the regression outcomes from this exercise with our baseline results suggests the redistribution does not affect the Upattern Our conclusions are highly robust After altering variable measurements，modifying model specifications，and incorporating additional control variables，the observed Ushaped pattern in the impact of digital government development on income inequality remains unchanged
To mitigate the potential widening of income disparity in China posed by digital government development，we propose two policy recommendations First，during the construction of digital government，Chinese government should focus on expanding the coverage of digital technologies and enhancing the precision of public services，enabling as many people as possible to access government services through digital platforms，thus achieving equalization of public services and bridging the digital divide effectively Second，Chinese government should further broaden and deepen the application of digital technologies in the income redistribution process
Our study underscores three significant contributions First，we extend the research on the influence of information and communication technology on income inequality from the perspective of digital government Second，we identify the heterogeneous impact of digital government on income distribution at different stages of development Thirdly，we provide credible empirical evidence concerning the influence of digital government on inclusive income growth through crossnational data analysis Our findings offer insights into the systemic impact of digital government on income inequality，providing new policy pathways for promoting common prosperity in China
