Enhancing Efficiency of Public Expenditure Through GovTech

Abstract How can the digitalization of fiscal operations (GovTech) improve budget processes and the delivery of public expenditure? A simple framework identifies three channels--greater transparency, lower administrative costs, and improved targeting of social assistance--and generates testable predictions. This paper provides systematic cross-country evidence, extending insights from the micro-experimental literature to the macro level. Fixed-effects regressions show that digital budget payments and e-procurement are associated with higher budget transparency and broader social assistance coverage among the poor. However, adopting GovTech strategies alone is insufficient to unlock these gains. Causal forest estimates reveal substantial heterogeneity: with the largest gains in social transfer coverage in countries that have enabling institutions such as digital identification systems. Digital connectivity exhibits nonlinear effect—strong at low levels of access but yielding diminishing returns once near-universal coverage is achieved. These results highlight the importance of sequencing GovTech with foundational enablers, particularly in low- and middle-income countries. JEL Classification: E60, H11, H50, H61, H83, O23, O38