E-government and public investment management under fiscal consolidation

Type of the article: Research ArticleAbstractThe study tests whether e-government development is associated with the level of central-government investment and the size of the investment cut that accompanies fiscal consolidation. Two-way fixed-effects panel regressions are estimated for 134 economies across the twelve waves of the United Nations E-Government Survey between 2003 and 2024 (1,319 country-wave observations), with World Bank and International Monetary Fund (IMF) fiscal data. When the primary balance improves by at least one percentage point of GDP in a survey year, countries at the 25th percentile of the E-Government Development Index cut central-government investment by 0.94 percentage points of GDP, and those at the 75th by 0.20 (interaction β = 2.15 per index unit, p = 0.009). Above the upper quartile, the cut is indistinguishable from zero. Outside consolidation episodes, e-government development has no detectable association with investment levels, and the estimate rules out the negative cross-country gradient. The same pattern holds for the capital share of central-government spending and across alternative episode definitions, winsorized outcomes, leave-one-country-out, permutation, and placebo tests and two independent investment series; it is not separable from government effectiveness and weakens with country-specific trends and upper-tail trimming. Episodes achieved through revenue and current spending leave investment untouched at every level of the index; the attenuation reflects the composition of fiscal adjustment. The evidence casts e-government as a marker of the administrative capacity that keeps consolidation off the capital budget; if the association is causal, digital budget, procurement, and project-pipeline systems belong in place before adjustment begins.AcknowledgmentThe contribution of Liudmyla Zakharkina was prepared within the framework of the research project “GovTech for Ukraine: A Digital, Secure, Transparent, and Equitable State in Times of War and Post-War Reconstruction” (registration number 0126U000544), funded by the Ministry of Education and Science of Ukraine. The other authors received no external funding for this study.