Institutional complements or substitutes? Digital government, the rule of law, and investment in post-Soviet economies
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DOIhttp://dx.doi.org/10.21511/imfi.23(3).2026.40
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Article InfoVolume 23 2026, Issue #3, pp. 615–634
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Type of the article: Research Article
Abstract
Digital government is advancing worldwide while foreign investment contracts and becomes more selective, making it a first-order policy question whether e-government can attract capital without strong formal institutions. The study aims to establish whether the investment payoff of digital government depends on the rule of law in 15 post-Soviet economies, separating the within-country and between-country dimensions of this relationship over 2008–2024. A biennial panel aligned to the nine UN E-Government Survey waves (135 country-wave cells; baseline N = 120) is estimated with two-way fixed effects, a within-between specification that tests each dimension separately, an EGDI × Rule of Law interaction, wild cluster bootstrap inference, and a robustness battery of seventeen alternative specifications. Within countries, no complementarity is found. The interaction equals –0.191 (SE = 0.447, bootstrap p = 0.690, bootstrap 95% CI from –1.616 to 0.742), and the marginal effect of a one–standard–deviation EGDI increase is insignificant at every rule-of-law level (–0.979 to –1.481 percentage points of GDP). Between countries, the level association is null as well; the between-country slope equals –1.083 (bootstrap p = 0.692). The only conditional structure is exploratory and substitution-signed, an interaction of –2.619 outside the EU members (bootstrap p = 0.013) that does not survive correction for multiple specifications (Holm-adjusted p = 0.226). Digital government offers no detectable investment premium at either level.
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JEL Classification (Paper profile tab)F21, O38, O17, P33
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References74
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Tables10
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Figures4
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- Figure 1. Joint distribution of digital government and the rule of law, 2008–2024 (standardized values; labels mark the 2024 wave; color indicates the survey wave)
- Figure 2. Marginal effect of a one-standard-deviation increase in the lagged EGDI on FDI inflows across the lagged rule-of-law distribution
- Figure 3. Interaction coefficient across seventeen specifications
- Figure 4. Digitalization and rule-of-law trajectories in the illustrative economies Ukraine, Kazakhstan, and Latvia (standardized values, 2008–2024)
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- Table 1. Variable definitions and sources
- Table 2. Descriptive statistics, biennial panel of 15 post-Soviet economies, 2008–2024
- Table 3. Digital government, the rule of law, and FDI inflows, estimated by two-way fixed effects
- Table 4. Within- and between-country slopes from the within-between (REWB) specification
- Table 5. EU heterogeneity of the interaction, triple-interaction specification
- Table 6. Within-country EGDI slopes by rule-of-law terciles, exploratory
- Table A1. Sample composition: countries, income groups, and rule-of-law terciles
- Table B1. Pairwise correlation matrix
- Table C1. Robustness battery: full estimates
- Table D1. Four-component decomposition of the EGDI × Rule of Law interaction, within-between specification
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