E-citizen model at the digital municipality level and
macroeconomic analysis of internet services
SALAYEV ELKHAN ADIL
Azerbaijan State University of Economics (UNEC)
Faculty of Business and Management, AZERBAIJAN
Abstract: The article focuses on the formation of civil society, which plays an
important role in the implementation of e-municipality, and the study of the shades
of influence at the macroeconomic level. From this point of view, the article
analyzes the contribution of Internet services to the social economy of Azerbaijan in
2000-2020. The purpose of this study is to investigate digital citizenship on social
field in municipalities and to investigate relations among Internet services, fixed
capital investment, per capita income and subsidies to local budgets (municipalities)
using economic methods of econometric analysis, and to determine the direction of
relations. The research methodology is based on the ARDL (autoregressive
distributed lag models) cointegration technique and the Granger Causality test.
According to the ARDL co-integration analysis, there is a one-sided cause-and-
effect relationship between internet services (thousand manats) and subsidies
(million manats) to local budgets (municipalities). The limitation of scientific
research covers the processes of establishing civic relations in e-municipality and
the processes within economic relations in the field of ICT. According to the results,
the impact of Internet services (thousand manats) on subsidies (million manats) to
local budgets (municipalities) is positive.
Keywords: e-municipality, e-citizen, digital, ICT, subsidy
Received: June 27, 2022. Revised: May 21, 2023. Accepted: June 19, 2023. Published: July 11, 2023.
1.Introduction
The main task of the municipal
management development line is to
transform the management into an
innovative socially oriented type of
management. Based on this, the
application of digitalization services
in municipal administration can lead
to basic innovations and
improvements in this structure. That
is, the addition of Internet services to
the activities of municipalities
involves the development of an e-
citizen model in the context of
documenting civil relations. Knowing
the basics of modern documentation
of management activities is a tool for
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local self-government bodies to work
effectively in providing better
municipal services.
Internet technologies allow creating
new forms of communication, new
sources of information and new
platforms for disseminating
information. These platforms have a
strong impact on people's lives,
cultural characteristics and social
trends, as well as large social
structures such as economics and
politics. [1] In modern times, Internet
services are of great importance in
human life, as well as in the
municipal management system of
developed countries. Internet services
embody the operation of the
subsystems of the municipal
management system which are
managed or manage and it can be
considered as the circulation, input
and processing of information about
the external environment for the
operation of the municipal
management system. From this point
of view, the provision of digital
services in local self-government
bodies has laid the foundation for the
adoption of e-municipality. The
concept of e-municipality includes the
application of modern information
and communication technologies in
local self-government activities of
municipalities, the provision of
services to citizens and other
institutions via the Internet.[9]
As a new form of interaction, e-
municipality envisages the creation of
socially oriented projects based on
ICT in the municipality in order to
provide various services to the
population.[2] The current situation in
municipal governance is not of
serious economic interest for socially
and strategically important issues that
are commercially inefficient. For this
reason, it is important to finance the
provision of new services in the
municipal administration, and it is
also important to implement a public
policy to attract investment. The
application of municipal services in
the form of Internet services also
depends on the opportunities available
in this field in the country. In general,
how Internet services are offered, as
well as how these services are met
and used by the population, are
among the factors that have a
significant impact on the e-municipal
system. In this regard, the analysis of
the impact of Internet services in the
macroeconomic field and the impact
on e-municipal services was studied
in our research.
2. Literature review
Stuck and Weingarten (2003)
discuss how the telecommunications
industry in the US is growing despite
the slower growth rate in GNP. The
authors concluded that the main
driver of this growth was new
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products and services. Because people
are willing to pay to improve their
lives and businesses.
In the joint study conducted by
Eleazar B. and San Miguel (2019), it
was determined that macroeconomic
indicators such as real gross domestic
product, inflation rate and exchange
rate are closely related to the price
indicators of ICT service sector
components. The authors compared
the Services Sector Index with future
values of price performance and
selected macroeconomic indicators
and found that it was not significantly
correlated with dependent variables to
advance the emerging results.
Mujahit Öztürk (2021) examined
the concept of digital citizenship and
how it is applied to different age
groups in his research. The study
reveals that more studies are needed
on the impact of digital citizenship on
younger age groups as they are more
exposed to threats in the digital
environment. The researcher
concluded that it is very important for
people to acquire the skills to use
digital technologies correctly and
safely.
Ali Şahin, (2007) mentioned
different approaches to e-municipality
practices in his article. The study
states that although there is a lack of
qualified personnel specialized in
information and communication
technologies in Turkish public
administration, this is not the only
factor preventing the successful
implementation of electronic
municipalism in municipalities.
Research shows that the lack of
investment in human resources and
the one-way information transfer on
the websites of municipalities also
prevent electronic municipality
applications. As a result of the study,
it has been shown that legal
regulations and implementation
strategies should be developed for the
dissemination of e-municipality
applications.
Колесникова Е.В., (2019)
research aims to find out how
effective websites are in promoting
goods and services. The study
examined how websites were
developed in the regional market and
found that they often lacked the
required level of creativity. In
addition, the survey results showed
that users have different opinions
about the usefulness and
attractiveness of websites.
Əliyev A.G., (2019) öz
araşdırmasında müəyyən etmişdir ki,
Azərbaycanda qeyri-neft sektorunun
inkişafında və iqtisadiyyatın rəqabət
qabiliyyətinin artırılmasında İKT
sektorunun xüsusi əhəmiyyəti vardır.
Aparılan reqressiya təhlili nəticəsində
məlum olmuşdur ki, İKT sektorunun
gəlirlərinin artması ÜDM-in həcmini
artırır. İKT qeyri-neft sektorunda
ÜDM-in artımına da müsbət təsir
göstərir. Nəticədə İKT sektorunun
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gəlirləri gələcək ÜDM-in artımı üçün
imkanlar yaradır.
Georges H., (2017) found in his
research that the Internet has a
positive effect on economic indicators
in Arab and Middle Eastern countries.
However, middle-income countries in
the region have not yet had a
significant impact on economic
growth. In addition, as a result of the
study, it has been proposed to take
measures to increase the economic
impact of the ICT sector, including
increasing competition and easing
restrictions on foreign investments.
3. Subsidies allocated to
municipalities
One of the important sources of
income for the operation of
municipalities in Azerbaijan is the
allocations from the state budget.
According to the Law on the Budget
System, transfers - subsidies, as well
as targeted funding - subsidies and
subventions can be provided from the
state budget to local budgets to cover
the budget deficit. The part of local
budget expenditures that are not
covered by their own revenues (local
budget deficit) may be covered by
subsidies from the state budget.[13]
The norms applied in the calculation
of local budget expenditures receiving
subsidies, subventions and loans from
the state budget shall not exceed the
expenditure norms applied for the
calculation of state budget
expenditures. When calculating the
amount of subsidy, the number of
people living in the municipality, their
share in the formation of the country's
financial resources, municipal
revenues and expenditures, location
of settlements within the municipality
on the front line, border zone, high
mountainous area, living standards,
socio-economic projects should be
taken into account.
Subsidies are gratuitous funds
provided from the state budget to
local budgets in order to regulate their
revenues and expenditures.
Municipalities may cover the part of
their expenditures (the local budget
deficit) that are not covered by their
own revenues with subsidies from the
state budget. In determining the
amount of the subsidy, the number of
people living in the municipality and
their share in the formation of the
country's financial resources are taken
into account.
4. E-citizen model in e-
services of the municipality.
Today, the concept of dichotomy of
civilization is widely used. This
implies the division of civilizations
into technogenic and traditional
forms. The first is used in the sense of
a resource, and the second shows a
collective and social advantage.[14]
In local (municipal) areas where
collective relations take place,
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productive close relations are
established with the help of
information systems. Municipal
Information System is a complete
technological, software and
information environment for the
creation, storage and dissemination of
information for the interests of
municipal authorities, institutions and
citizens. Municipal Information
System is an information support tool
for municipal administration and
should be considered as a set of all
information technologies adopted by
the organization.
E-municipality can be defined as a
modern municipal approach that
provides transparent services to
people using advanced technologies
in a rapidly changing world of
technological development.[11] The
following areas of use of modern
information technologies in the
activities of municipalities can be
distinguished:
- information interaction of municipal
management entities;
- information and analytical support
for management decisions;
- providing paperless technology for
information processing and storage.
Digital transformation has an
accelerating and transforming effect
on the life cycle of formal and
informal institutions. It remains the
socio-cultural type of society and
begins gradually over a long period of
time.[12] E-citizenship is a person's
attitude towards membership in the
digital community. In local self-
government bodies, e-citizens have
the opportunity to express their views
on referendums, elections and other
general issues.
The e-citizen model within the digital
services of the municipality can be
described in the following scheme:
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Scheme 1. Establishment of e-citizen model in digital municipal services
In general, this model allows all
members of society to actively
participate in local governance. The
ability to process, store and transmit
these types of electronic information
processes encourages the socialization
For information
According to the
levels
Collection of system
data on information
carriers to provide
access to data for
external users
Cataloging,
systematizing and
presenting
information from
various data arrays in
Presentation of the
results of
analytical
processing of
information in a
One-sided
Consultative
Interactive
Feedback-providing an
opportunity to make
suggestions on how to solve
problems or other issues
Transaction
Online transaction
services
Vertical integration
Perform functional
operations on local systems
by connecting to higher-
Horizontal integration
Presentation of real
administrative operations for
citizens on different functions
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of people with hearing and speech
disabilities.[10] It is clear from the
scheme that the e-citizen receives
information from the municipality at
3 levels. Creating the widest range of
connections within them is possible
when performing online transactions.
Creating the widest range of
connections within them is possible
when performing online transactions.
The Municipal Information System
presented in Scheme 1 allows the
implementation of the “one window”
principle for the provision of
administrative services to the
population. Citizens have access to
relevant levels of information to
benefit from the services. The main
purpose of the e-citizen model is to
ensure the implementation of
municipal functions in electronic
form. At the interactive level, the
Municipal Information System
transmits inquiries from citizens to
the information systems of the
relevant government agencies, and,
conversely, provides information to
the citizen on the processing of data
in the department's information
systems and the implementation of
operations during the surveys.
A well-organized documentation
center should describe all materials in
its collection and be accessible.
Cataloging in the Municipal
Information System should focus on
the successful execution of significant
transactions. When performing online
administrative operations, citizens
become participants in vertical and
horizontal integration processes.
Vertical integration involves a chain
of sending and transmitting requests
at different levels. Vertical integration
reflects a citizen's personal issues, as
well as complex connections for
business expansion and promotion.
However, horizontal integration
implies that citizens with the same
rights interact with each other
electronically.
5. Dataset and Econometric
Methodology
As the part of the study of e-services
in municipalities, it is important to
compare the level of Internet services
at the macroeconomic level in terms
of volume and profitability, as well as
to analyze the state of financial
assistance to municipalities. The data
have been taken from the official
website of the State Statistical
Committee of the Republic
of Azerbaijan for analyzing the
relation between fixed capital
investments and Internet services.[5]
The statistics used in the study refer
to 2000-2020. The variables in the
model are abbreviated as follows:
- INX: internet services (Dependent
variable)
- INXM: Internet services (thousand
manats) (Independent variable)
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- EKI: Fixed capital investments
(million manat) (Independent
variable)
- KBG: Per capita income (manat)
(Independent variable)
- YBVDOT: Subsidies to local budgets
(municipalities) (million manat)
(Independent variable)
Cointegration tests are used to
analyze the long-run relationship of
variables to each other. In commonly
used cointegration tests, the variables
must be stationary in the same way.
This situation creates some problems
in the use of the cointegration test.
These problems are solved by the
ARDL method, which allows to
analyze the long-run relationship
between non-stationary variables of
the same sequence. This ARDL test,
developed by Peseran et al., is widely
used in cointegration tests.[6]
Cointegration analysis is performed
with the ARDL model using the
following formula.
(1)
(2)
The symbol Δ in formula 2 represents
the difference operator, the fixed
condition, the error term. To conduct
the cointegration analysis, formula (1)
is first evaluated. After formula (1) is
found, the long-run relationship
should be checked. The Wald test is
used to check for the existence of a
long-run relationship between
variables. The hypotheses of this test
are as follows:
÷ ==0,
(3)
The statistical value F calculated for
the analysis of the long-run
relationship is compared with the
levels of significance obtained in the
studies of Pesaran and Smith. If the F
statistic is above the critical value, H0
is rejected and H1 is accepted. Based
on this, it is known that there is a
cointegration connection.
Once the model is determined to have
a cointegrating relation, long-run
coefficients are obtained. The ARDL
(m, n) model in formula (4) is used to
calculate the long-run coefficients.
(4)
After determining the coefficients of
the long-run relationship, the model
compatibility is decided by reviewing
the experiment tests of the model. An
ARDL-based error correction model
is used to determine short-run
relationships between variables. The
following formula (5) is used for this.
(5)
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HDMt-1 in formula (5) is correction
term of variable errors. The error
correction factor represents the
delayed value of the remains of the
model in which a long-run
relationship is obtained between the
variables. The HDM coefficient
indicates how long the effects of a
short-run shock will disappear in the
long run.[4]
6. Application and results
6.1 Unit Root Analysis
Stationary in time series means that
the variance does not change over
time. It is important for the series to
be stationary in studies that use time
series data.
When non-stationary series are used
in the analysis of time series, the
results of the model to be used are
unrealistic, and the use of non-
stationary series leads to a fake
relation between the variables in the
model. The most reliable analysis
used to determine the stationary of a
variable, or its degree of stationary, is
the Unit Root Test.[7] Although Unit
Root Tests are of great importance in
econometric research, they are used in
many fields.
The most commonly used unit root
tests in practice:
- Dickey Fuller (DF)
- Extended Dickey Fuller (ADF)
- Phillips-Perron (PP) unit root tests.
Table 1. Phillips Perron (PP) unit Root test result
UNIT ROOT TEST TABLE (PP)
At Level
INX
INXM
EKI
YBVDOT
With
Constant
t-Statistic
4.2492
-5.1652
-4.4570
-14.0648
Prob.
1.0000
0.0006
0.0027
0.0000
n0
***
***
***
With
Constant &
Trend
t-Statistic
-0.6071
-7.0211
-5.0684
-13.5722
Prob.
0.9661
0.0001
0.0036
0.0000
n0
***
***
***
Without
Constant &
Trend
t-Statistic
4.5379
-2.6956
-4.1242
-10.7166
Prob.
0.9999
0.0099
0.0003
0.0001
n0
***
***
***
At First Difference
d(INX)
d(INXM)
d(EKI)
d(YBVDO
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T)
With
Constant
t-Statistic
-4.6440
-14.8667
-5.8751
-42.5163
Prob.
0.0020
0.0000
0.0002
0.0000
***
***
***
***
With
Constant &
Trend
t-Statistic
-13.3124
-14.8703
-7.7333
-41.2988
Prob.
0.0000
0.0001
0.0000
0.0001
***
***
***
***
Without
Constant &
Trend
t-Statistic
-3.3756
-12.7930
-5.9348
-41.0697
Prob.
0.0021
0.0001
0.0000
0.0001
***
***
***
***
Notes: (*)Significant at the 10%; (**)Significant at the 5%; (***) Significant at
the 1%. and (no) Not Significant
Table 2. ADF unit root test result
UNIT ROOT TEST TABLE (ADF)
At Level
INX
INXM
EKI
YBVDOT
With Constant
t-Statistic
1.1398
-5.2870
-5.5797
-3.5870
Prob.
0.9962
0.0005
0.0003
0.0189
n0
***
***
**
With Constant &
Trend
t-Statistic
-1.4407
-7.4691
-5.8668
-3.8063
Prob.
0.8138
0.0000
0.0009
0.0442
n0
***
***
**
Without Constant &
Trend
t-Statistic
2.6296
-2.7238
-4.9611
-3.7100
Prob.
0.9962
0.0093
0.0001
0.0009
n0
***
***
***
At First Difference
d(INX)
d(INXM)
d(EKI)
d(YBVD
OT)
With Constant
t-Statistic
-4.6242
-11.3747
-5.9795
-14.1905
Prob.
0.0021
0.0000
0.0002
0.0000
***
***
***
***
With Constant &
Trend
t-Statistic
-3.8558
-11.1286
-5.7029
-13.7180
Prob.
0.0406
0.0000
0.0015
0.0000
**
***
***
***
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Without Constant &
Trend
t-Statistic
-3.3847
-11.5401
-6.2262
-14.6159
Prob.
0.0020
0.0001
0.0000
0.0001
***
***
***
***
Notes: (*)Significant at the 10%; (**)Significant at the 5%; (***) Significant at
the 1%. and (no) Not Significant
Table 1 and Table 2 show the 1%,
5%, and 10% confidence intervals for
the variables. INXM, EKI, and
YBVDOT appear to be stationary at
ADF and PP unit root tests. Unit root
tests of ADF and PP show that the
INX level is not stationary and it
becomes stationary when the first
difference is obtained. Once the
appropriate values of stationary are
determined, the cointegration test can
be applied using the Autoregressive
Distributed Lag Models (ARDL)
model.
6.2. ARDL cointegration test
Cointegration analysis eliminates
data loss due to differences in long-
run time series and provides great
flexibility for its resolution. Engle
Granger, Johansen and ARDL are
some of the cointegration tests.
Cointegration tests are also used to
check the long-run relationship
between variables. Frequently used
cointegration tests assume that the
variables are stationary at the same
level. Therefore, there is a limitation
in cointegration tests. However,
Pesaran and the others (1996)
proposed the ARDL approach, which
allows the analysis of the relationship
between stationary variables at
different levels.[8]
In our study, INXM, EKI and
YBVDOT levels are stationary. INX
was analyzed as a first-class
stationary. Therefore, the ARDL
approach was preferred in the
cointegration test.
Table 3. ARDL (1, 4) Model Diagnostic Test Results
Table 3 ARDL test results (INX)
Tests
Statistics
(EKI)
Statistics
(INXM)
Statistics
(YBVDOT)
R-squared
0.787807
0.497967
0.043171
Adjusted R-squared
0.646345
0.390388
-0.161864
F value
5.569032
(0.011417)
4.628871
(0.018889)
0.210556
(0.887407)
Breusch-Godfrey LM
0.176682
(0.8417)
0.20118
(0.8205)
0.665795
(0.5319)
Jarquera-Bera Normality
0,181181
0,950055
9,536512
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(0,913392)
(0,621858)
(0,008495)
When the ARDL test results are
analyzed in Table 3, the R-squared
value of 0.787807 appears to be able
to explain 78.7807% of the value of
the independent variable EKI in the
dependent variable INX. In contrast,
the F-statistic shows that the model as
a whole is important because it is
smaller than the critical values of 0.05
and 0.10. Breusch-Godfrey values
show that there is no dispersion
problem in the model. When this
value is analyzed, it seems that there
is no such a variable that is not taken
into account in our study. The
Jarquera-Bera Normality value
indicates that the errors have a normal
distribution. The closer this value is to
zero, the more accurate the
distribution corresponds to the normal
distribution.[3] If the R-squared value
of INX and INXM is 0.497967 it
means that the independent variable
INXM can explain 49.7967% of the
changes in the dependent variable
INX, and the explanatory power
seems being moderate. On the
contrary, the F-statistic result shows
that the model as a whole is
important, because it is smaller than
the critical values of 0.05 and 0.10.
The R-squared value of INX and
YBVDOT is 0.043171, and the
independent variable YBVDOT can
explain 4.3% of the changes in the
dependent variable INX, and its
explanatory power is very weak. The
fact that the F-statistical result is not
less than the critical values of 0.05
and 0.10 indicates that the model is
completely insignificant.
Table 4. Bounds test results (INX and EKI)
ARDL bound F-
statistic
Bounds Test
INX
(1,4)
11.77162
Significance level
Lower bound
Upper bound
10%
3.02
3.51
5%
3.62
4.16
1%
4.94
5.58
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Table 4 shows the bounds test
results of the model. The results of the
Bounds test are used in the ARDL
model to analyze whether there is a
long-run relationship between the
variables or no. As the Bounds F-
Statistical value is calculated as
11.77162 and exceeds the upper
bound value at 1%, 5% and 10%
significance levels compared to the
critical values, H0 is rejected.
According to this result, there is a
cointegration relationship between the
levels, and it shows us that there is a
long-run relationship between the
variables.
Table 5. Bounds test results (INX and INXM)
ARDL bound F-
statistic
Bounds Test
INX
(1,4)
7.703564
Significance level
Lower bound
Upper bound
10%
4.04
4.78
5%
4.94
5.73
1%
6.84
7.84
Table 5 shows the bounds test
results of the model. The results of the
bounds test are used in the ARDL
model to analyze whether there is a
long-run relationship between the
variables or no. As the Bounds F-
Statistic value is calculated as
7.703564 and exceeds the upper
bound value at 1%, 5% and 10%
significance levels compared to
critical values, H0 is rejected.
According to this result, there is a
cointegration relationship between the
levels, and it shows us that there is a
long-run relationship between the
variables.
Table 6. Long-run coefficient results
Variable
Coefficient
Std. Error
t-Statistic
Prob.
EKI
-0.031874
0.009532
-3.344057
0.0086
C
0.861074
0.138879
6.200176
0.0002
EC = INXF - (-0.0319*EKI + 0.8611)
Table 6 shows the long-run
coefficients of the variables in the
ARDL model. Accordingly, if there is
1% increase in EKI during the study
period, it has 0.31874% negative
impact on INX. In other words, in
addition to cointegration with EKI,
the direction of this relationship is
negative. It means that 1% increase in
EKI leads to 0.31874 decrease in
INX.
EARTH SCIENCES AND HUMAN CONSTRUCTIONS
DOI: 10.37394/232024.2023.3.3
Salayev Elkhan Adil
E-ISSN: 2944-9006
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Volume 3, 2023
Table 7. Long-run coefficient results
Variable
Coefficient
Std. Error
t-Statistic
Prob.
INXM
0.017711
0.013292
1.332440
0.2040
EC = INXF - (0.0177*INXM )
1% increase in INXM has a
positive impact on INX of 0.17711%.
In other words, despite the lack of
cointegration of the INXM, the
direction of this relationship is
positive. In this regard, during the
study 1% increase in INXM has
0.17711% positive impact on INX. In
other words, 1% increase in INXM
leads to 0.17711% increase in INX.
6.3. Granger Causality Test
Table 8. Granger causality test results
Null Hypothesis:
F-Statistic
Prob.
EKI does not Granger Cause INX
2.99912
0.0849
INX does not Granger Cause EKI
0.74972
0.4919
INXM does not Granger Cause INX
0.67547
0.5259
INX does not Granger Cause INXM
2.78198
0.0987
YBVDOT does not Granger Cause
INX
0.01815
0.9820
INX does not Granger Cause
YBVDOT
0.02655
0.9739
INXM does not Granger Cause EKI
0.73168
0.4999
EKI does not Granger Cause INXM
1.44769
0.2706
YBVDOT does not Granger Cause EKI
0.27575
0.7633
EKI does not Granger Cause YBVDOT
0.39245
0.6831
YBVDOT does not Granger Cause
INXM
0.02655
0.9739
INXM does not Granger Cause
YBVDOT
6.90674
0.0090
Table 9 shows the results of the
Granger causality test. The effects of
EKI or INT have been investigated
here. Table 9 also shows the results of
the Granger test calculated with 2
delayed values. Table 9 shows the
cause-and-effect relationship between
the variables. Accordingly, at the 5%
significance level, the probability that
INX has no effect on INXM is
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Volume 3, 2023
rejected. Taking into account the
results given in the table, the
probability that the INX has no effect
on the EKI is accepted to be at the 5%
significance level. In other words,
there is a one-sided causal relation
from EKI to INX. It means that EKI
affects INX. In addition, this result
supports long-run coefficient results
in the ARDL model.
7. Conclusion
The electronic citizen model is the
formalization of legal and technical
measures that combine the digital
environment and the physical
environment. The e-Citizen model for
the implementation of municipal
activities accelerates processes,
increases the utility, transparency and
quality of services. The e-citizen
model depends on the level of internet
services provided at the
macroeconomic level. The high level
of internet services as an
infrastructure factor has a positive
impact on the provision of digital
municipal services.
The scientific and practical
significance of the research is that the
features of economic utility of
technological communication
processes in the relevant field have
been studied and they have been
explained theoretically. As a result of
the analysis, it should be noted that at
the 5% significance level, the
probability that INX has no effect on
INXM is rejected. The probability
that the INXM has no effect on the
INX is accepted to be at the 5%
significance level. In other words,
there is a one-sided causal
relationship from INXM to INX. It
means that INXM affects INX.
On the other hand, at the 5%
significance level the probability that
the INXM does not affect YBVDOT
is rejected. The probability that
YBVDOT has no effect on the INXM
is accepted to be at the 5%
significance level. In other words,
there is a one-sided causal
relationship from INXM to
YBVDOT. It means that INXM
affects YBVDOT.
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is relevant to the content of this article.
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