Lost Economic Output due to High Bureaucratic Burden: The Case for Germany

Abstract Our research examines the overall economic costs arising from high levels of bureaucracy and shed light on whether and to what extent the digitalization of administrative processes can reduce the economic costs of bureaucracy. The results of our international analysis show that a fundamental reduction in bureaucracy is accompanied by a 4.6-percent average increase in real GDP per capita. Using Germany’s GDP as a case study, this would correspond to an annual increase in real GDP per capita of EUR 1,766, or EUR 146 billion in total per year, on average. Moreover, our data suggest that comparable effects are likely to apply to other EU countries as well. Our results also show that a digitalization push in public administration can increase the level of real GDP per capita by 2.7 percent while maintaining the same level of bureaucracy. Moreover, the positive impact of digitalization is particularly strong in countries with high levels of bureaucracy.