Article

Integrating Artificial Intelligence into Public Administration:

Challenges and Vulnerabilities
Anca Florentina Vatamanu * and Mihaela Tofan

Faculty of Economics and Business Administration, Alexandru Ioan Cuza University, 700107 Iasi, Romania;
[email protected]
* Correspondence: [email protected]

Abstract: This study explores the application of artificial intelligence (AI) in public ad-
ministration, examining its potential to enhance efficiency, sustainability, and resilience
in government actions. The research develops a theoretical framework to assess the re-
lationship among AI integration, governance improvements, and economic benefits, as
measured by key components of the Digital Economy and Society Index (DESI). Utilizing
factor analysis and ordinary-least-squares (OLS) regression, this study provides empirical
insights into how AI-driven applications contribute to public service delivery and eco-
nomic growth. The findings highlight that AI has the potential to improve governance
significantly. Still, the transition to AI-enhanced public administration is accompanied by
challenges such as algorithmic bias, cybersecurity risks, workforce adaptation, and ethical
issues. This study emphasizes the need for robust governance structures, comprehensive
security measures, and active public involvement to address these challenges. By proposing
a clear framework for managing AI integration, this research contributes to the literature on
digital transformation in the public sector and offers actionable insights for policymakers
and practitioners. Future research should examine AI’s broader applications across diverse
public sector contexts, ensuring that governance remains aligned with democratic values,
public trust, and long-term sustainability.

Keywords: artificial intelligence; public administration; governance frameworks; AI

governance; service delivery

Received: 14 February 2025

Revised: 15 April 2025
Accepted: 16 April 2025
1. Introduction
Published: 18 April 2025 Advancements in artificial intelligence (AI) have garnered significant interest from
Citation: Vatamanu, A. F., & Tofan, M. researchers and practitioners, unveiling a wide array of opportunities for its application
(2025). Integrating Artificial in the public sector. AI has the potential to enhance governmental efficiency, optimize
Intelligence into Public decision-making processes, and improve public service delivery. By automating routine
Administration: Challenges and
tasks, analyzing vast datasets, and enabling data-driven policymaking, AI can contribute
Vulnerabilities. Administrative Sciences,
15(4), 149. https://doi.org/10.3390/
to more transparent, responsive, and citizen-focused governance. However, the impact
admsci15040149 study of AI’s use in the public administration process shows these benefits require the
in-depth addressing of key challenges, including ethical considerations, data privacy
Copyright: © 2025 by the authors.
Licensee MDPI, Basel, Switzerland.
concerns, algorithmic biases, and robust regulatory frameworks. A strategic approach to
This article is an open access article AI integration can ensure that its adoption in public sector actions fosters innovation while
distributed under the terms and upholding democratic values and the public’s trust. The growing adoption of AI in public
conditions of the Creative Commons administration, particularly within the context of the ongoing developmental doctrine on
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smart cities (Son et al., 2023), highlights the transformative potential of these technologies to
(https://creativecommons.org/
enhance transparency (Wolniak & Stecuła, 2024), optimize resource allocation, and improve
licenses/by/4.0/).

Adm. Sci. 2025, 15, 149 https://doi.org/10.3390/admsci15040149

Adm. Sci. 2025, 15, 149 2 of 23

public engagement (Abdullah Kaiser, 2024). Nevertheless, the absence of a comprehensive

understanding of AI-driven mechanisms, their legal implications, and the challenges they
pose presents a significant barrier to their effective implementation. Public administrations
must manage a delicate balance between leveraging AI’s capabilities and safeguarding
the public’s trust, equity, and safety (Hattab et al., 2025). The integration of AI into public
administration activities and processes introduces complex challenges and vulnerabilities
that must be carefully addressed to ensure its responsible and equitable use. Although
AI-powered machines have significantly shaped societal evolution in the 21st century and
have offered promising opportunities for scholars, their impacts on public administration
development remain uncertain despite growing attention. Studies indicate that further
analysis is needed to fully understand these effects and their implications (Correia et al.,
2024; Reis et al., 2019; Young et al., 2019).
Advancements in artificial intelligence (AI) have garnered significant interest from
researchers and practitioners, unveiling a wide array of opportunities for its application
in the public sector. Historically, the adoption of AI in public administration dates back
to the emergence of expert systems in the 1980s, primarily supporting tax auditing, fraud
detection, and basic decision support in sectors like social security and municipal ser-
vices (Mergel et al., 2019; Wirtz et al., 2019). The evolution of AI policy frameworks
accelerated in the early 2000s with the rise of e-Government initiatives, which laid the foun-
dation for data-driven public services (Criado & Gil-Garcia, 2019). Over the past decade,
breakthroughs in machine learning, big-data analytics, natural language processing, and
cloud computing have fueled a new wave of AI integration, transforming governance
paradigms across advanced economies and emerging markets alike (Madan & Ashok, 2023;
Janssen et al., 2020).
From a theoretical standpoint, several frameworks explain this progression. The
technology–organization–environment (TOE) framework (Baker, 2011) provides a holistic
view, emphasizing how external pressures (regulatory demands), internal organizational
readiness (digital skills and infrastructure), and technological advancements (AI maturity)
interact to shape AI adoption in the public sector. Additionally, the Unified Theory of
Acceptance and Use of Technology (UTAUT) (Venkatesh et al., 2003; Sarfaraz, 2017) identi-
fies performance expectancy, effort expectancy, social influence, and facilitating conditions
as the key drivers of public managers’ acceptance of AI technologies. These frameworks
are essential for understanding why some governments adopt AI rapidly while others
lag behind. Ethical and governance-oriented models also provide valuable insights. The
OECD’s (2019) Principles on AI and Floridi and Cowls’s (2022) Unified Framework (2022)
emphasize trustworthy AI, focusing on transparency, accountability, human-centered val-
ues, and risk management. These frameworks are crucial, as public administrators balance
innovation with ethical imperatives, especially in areas like algorithmic bias, data privacy,
and algorithmic accountability (Zuiderwijk et al., 2021). Globally, pioneering countries,
such as Estonia, Singapore, and the United Arab Emirates, have been at the forefront of AI
integration in governance. Estonia’s X-Road platform, for example, has enabled secure data
exchange across government entities, while Singapore’s Smart Nation initiative utilizes AI
for predictive policy modeling and citizen-centric services (Yigitcanlar et al., 2023). These
early adopters showcase the transformative potential of AI for enhancing administrative
efficiency, responsiveness, and public engagement while also illuminating risks related to
transparency, data security, and the erosion of the public’s trust.
The integration of artificial intelligence (AI) into public administration presents a
transformative potential that could enhance service delivery and operational efficiency
(Trajkovski, 2025). By leveraging AI technologies, governmental institutions can analyze
vast amounts of data to inform decision-making actors, streamline processes, and improve
Adm. Sci. 2025, 15, 149 3 of 23

citizen engagement. For instance, AI-driven analytics can assist in policy formulation
by predicting outcomes based on historical data and current trends. Moreover, tools
such as chatbots and virtual assistants have begun to revolutionize how public services
interact with citizens, providing timely information and improving accessibility (Cortés-
Cediel et al., 2023). However, this rapid advancement does not occur without challenges.
Concerns regarding data security, ethical considerations, and possible biases embedded in
AI algorithms pose significant questions on the potential vulnerabilities of the public’s trust
and public service efficacy. Scholars worldwide emphasize the need for in-depth research
and new key focus areas in public administration, highlighting that like many innovations,
the adoption of AI in the public sector presents considerable risks. These include job
displacement, constraints on decision-makers’ discretion, reduced transparency in decision
making, unclear accountability, and potential threats to privacy and anti-discrimination
protections (Yarovoy (2023); Longo (2022); Sobrino-García (2021); Wirtz et al. (2020)).
As AI continues to be integrated into public administration processes, several critical
challenges must be addressed to ensure its effective, safe, and ethical implementation. One
major concern is the potential for biases embedded within AI algorithms, which can result
in inequitable outcomes in the delivery of public services. These biases often arise from
training data that inadequately represent diverse populations, thereby reinforcing existing
social disparities (Roberto et al., 2018). Furthermore, the increasing dependence on AI-
driven decision-making processes raises concerns about transparency and accountability,
as algorithmic processes may obscure the rationale behind key policy decisions (Veale &
Binns, 2017). Without robust cybersecurity frameworks, AI-driven public administration
systems may become susceptible to cyberattacks, potentially undermining the public’s
trust in digital governance (Brundage et al., 2018). Resistance to change within organi-
zations, particularly in public administration, is frequently rooted in deeply ingrained
cultural norms and practices (Rehman et al., 2021). To reflect on this issue, at least with a
view to the human resource impact, we note that the integration of AI requires a cultural
transformation, which may be met with resistance from employees concerned about job
displacement or about having their role diminished in decision-making processes (Golgeci
et al., 2025). This underscores the need to cultivate a workplace culture that values continu-
ous improvement and innovation. Implementing AI is not merely a technological shift but
a profound organizational change that impacts culture, processes, and the workforce as a
whole (Madan & Ashok, 2023; Yigitcanlar et al., 2023; Agarwal, 2018; Ashok et al., 2016).
Moreover, understanding the various factors influencing organizational change can aid in
mitigating resistance by aligning AI initiatives with the overarching values and objectives
of the institution. Ultimately, cultivating an adaptive organizational culture is essential for
successfully leveraging AI technologies in public administration, ensuring both improved
efficiency and enhanced service delivery (Asmaa & Yasmina, 2024). To navigate these
challenges, policymakers and scholars must prioritize research into ethical AI governance,
algorithmic transparency, and cybersecurity resilience. The AI multidisciplinary approach
that integrates legal, technological, and social considerations is essential for fostering an AI-
enhanced public sector that is transparent, accountable, and inclusive while safeguarding
citizens’ rights and data integrity (Rodrigues, 2020; Chester, 2024).
This paper addresses a critical gap in the existing literature by providing both a
retrospective analysis and a forward-looking view on the application of AI in public ad-
ministration processes. Although prior research has explored AI’s potential in governance,
a comprehensive examination of its long-term impacts on service efficiency, transparency,
and decision making remains lacking. By analyzing past implementations and emerging
trends, this study not only assesses the benefits, challenges, ethical considerations, and
policy implications of AI use but also establishes a clear connection between AI-driven
Adm. Sci. 2025, 15, 149 4 of 23

governance improvements and economic growth through measurable Digital Economy

and Society Index (DESI) components. In light of these objectives, the following research
hypotheses are proposed:

H1. There is a positive and statistically significant relationship between the level of digital public
services (measured by DESI components) and the quality of governance in EU countries.

H0(1). There is no statistically significant relationship between digital public services and gover-
nance quality in EU countries.

H2. The development of digital public services and higher degrees of digitalization (measured
by DESI indicators) positively influence economic growth in EU countries, controlling for gover-
nance quality.

H0(2). Digitalization and the development of public services have no significant effect on economic
growth in EU countries.

By exploring past implementations and future possibilities, our research constructs a

comprehensive framework for understanding the complex interplay among AI, governance,
and economic growth. A key focus is the roles of DESI variables (human capital, connectiv-
ity, digital technology integration, and digital public services) as fundamental drivers of AI
use in the public sector. These components not only enable AI-driven transformation but
also serve as measurable indicators of governance improvements and economic benefits.
This paper highlights how AI can enhance governmental efficiency, transparency, and deci-
sion making while fostering economic competitiveness by linking AI integration to DESI
metrics. At the core of this analysis is the necessity of strong legal and ethical frameworks,
governance structures, and public engagement strategies to ensure that AI-driven innova-
tions contribute to a sustainable, inclusive, and resilient public administration. Addressing
challenges such as algorithmic biases, cybersecurity risks, and workforce adaptation is
essential for maximizing AI’s potential beneficial use while safeguarding democratic val-
ues and the public’s trust. Through this analysis, we argue that achieving sustainability
and resilience in public administration processes requires a comprehensive strategy that
integrates robust governance frameworks, stringent security measures, and proactive pub-
lic engagement. By addressing these challenges, public administrations can manage the
transformative power of AI to deliver efficient, transparent, and equitable services while
maintaining the public’s trust and ensuring fair outcomes for all stakeholders.
This article is organized as follows: The first section introduces the study’s background
and context, followed by a review of the relevant literature and the development of research
hypotheses. Next, the methodology section outlines the data collection and analysis
approaches. The subsequent section presents the results of the hypothesis testing, along
with a discussion of their theoretical and practical implications. Finally, the article concludes
with an overview of the key findings, limitations, and directions for future research.

2. Literature Review
Advancements in AI use have profoundly influenced the public sector’s operations,
unlocking transformative possibilities across various domains, including service delivery,
governance, and financial management. The integration of AI technologies has introduced
numerous opportunities to enhance efficiency, transparency, and data-driven decision
making. However, this evolution also brings forth a series of challenges, notably in areas
concerning ethics, data privacy, bias in decision making, and the shifting dynamics of the
workforce. Wirtz et al. (2019) provide a comprehensive framework by identifying ten
Adm. Sci. 2025, 15, 149 5 of 23

key areas where AI applications create value within the public sector. These applications
encompass a wide spectrum of activities, including process automation, advanced data
analytics, and tools for upgrading citizens’ engagement. The versatility of AI allows its use
for addressing complex administrative tasks, optimizing public services, and enhancing
the overall responsiveness of governmental institutions.
Mishra et al. (2024) further emphasize the increasing adoption of AI in public adminis-
tration to streamline operations and improve service delivery. For instance, AI-powered
chatbots automate routine citizen interactions, enabling public servants to focus on more
strategic and complex issues. Additionally, AI-driven decision support systems enhance
the accuracy and timeliness of government decisions by processing large datasets, rec-
ognizing patterns, and providing actionable insights (Khosravi et al., 2024). These tools
not only contribute to efficiency but also promote greater transparency and accountability
in governance. However, the authors also caution toward the ethical implications of AI
deployment, particularly concerning algorithmic biases in sensitive areas, like criminal
justice and social welfare, as well as the potential pressure on job displacement because
of automation.
Bouchetara et al. (2024) explore AI’s transformative role in public financial manage-
ment, particularly in enhancing risk management practices. Their study highlights how
AI-driven predictive analytics can improve public budget forecasting, detect financial fraud,
and optimize resource allocation. By leveraging machine-learning algorithms, governments
can identify patterns of financial mismanagement, mitigate fiscal risks, and enhance trans-
parency in public expenditures. Additionally, the research underscores the importance of
integrating AI with traditional financial oversight mechanisms to ensure its accountability,
minimize biases, and strengthen decision-making processes in the public sector’s finance.
As financial markets grow more complex, traditional risk mitigation strategies often prove
to be inadequate. In the area of public finance management, AI technologies, particularly
machine-learning algorithms, provide advanced tools for identifying and addressing risks
related to credit, market fluctuations, liquidity, and operations. By leveraging predictive
modeling and scenario analysis, governments can enhance fiscal planning, improve debt
management, and detect potential financial instabilities before they escalate. Furthermore,
AI-driven resource optimization enables more efficient allocation of public funds, ensuring
that financial policies are data-driven, proactive, and aligned with long-term economic
sustainability and fiscal responsibility. Nevertheless, the integration of AI into financial
systems also raises concerns about data privacy, the need for skilled personnel, and the
establishment of robust regulatory frameworks to ensure ethical and transparent use.
Complementing these perspectives, other literature highlights the broader implica-
tions of AI in the public sector. According to Janssen et al. (2020), AI can play a pivotal role
in fostering smart governance, where real-time data and predictive analytics are leveraged
to proactively address societal issues. The authors propose a comprehensive data gover-
nance framework for trustworthy big-data algorithmic systems (BDASs), emphasizing the
stewardship of data and algorithms, controlled transparency, trusted information sharing,
risk-based governance, and system-level controls. Sun and Medaglia (2019) emphasize
that AI adoption within the public healthcare sector is a multifaceted process influenced
by a range of stakeholder concerns encompassing ethical, technical, and organizational
dimensions. This complexity highlights the necessity for ongoing research to deepen the
understanding of these challenges and to devise strategies that promote the effective and
responsible integration of AI into the public sector’s operations. Moreover, the accelerated
deployment of AI technologies calls for a critical reassessment of workforce dynamics in
the public sector.
Adm. Sci. 2025, 15, 149 6 of 23

Recent scholarship has increasingly emphasized the transformative potential of ar-

tificial intelligence (AI) in public administration, highlighting both opportunities and
challenges. Babšek et al. (2025) offer a comprehensive overview of highly cited research
and practical applications, demonstrating a growing interest in how AI can enhance ef-
ficiency, decision making, and service delivery within the public sector. Their findings
suggest that although adoption is accelerating, it remains uneven across contexts, often
limited by organizational inertia and regulatory uncertainty. Complementing this perspec-
tive, Cantens (2024) critically explores the epistemological and institutional implications of
generative AI, such as ChatGPT, for state governance. He raises important questions about
how the state might “think” with such tools, warning that although generative AI holds
promise for streamlining administrative tasks and policy formulation, it also introduces
new risks related to transparency, accountability, and ethical governance. Together, these
studies underscore the need for a balanced, reflective approach to AI integration, one that
not only embraces innovation but also remains critically attentive to the implications for
democratic oversight and institutional legitimacy.
The accelerated development and deployment of generative AI technologies have
outpaced traditional regulatory mechanisms, creating an urgent need for comprehensive
governance frameworks. Established AI governance models, such as the OECD’s Principles
on Artificial Intelligence (OECD, 2019) and Floridi and Cowls’ (2022) ethical framework,
emphasize the importance of transparency, accountability, human-centric values, and risk
management in guiding AI innovation responsibly. These principles provide a normative
foundation to align AI development with societal expectations and ethical imperatives. At
the same time, understanding the adoption and diffusion of generative AI tools within
organizations requires insights from established technology adoption theories. The Unified
Theory of the Acceptance and Use of Technology (UTAUT) elucidates the roles of perfor-
mance expectancy, social influence, and facilitating conditions in shaping users’ acceptance,
while the technology–organization–environment (TOE) framework highlights how external
pressures, organizational readiness, and technological characteristics collectively influence
adoption decisions (Sarfaraz, 2017; Baker, 2011). Integrating these frameworks not only
deepens the theoretical grounding of AI governance discourse but also offers a multidi-
mensional lens to examine how policy, organizational behavior, and technological factors
converge to shape the responsible implementation of generative AI.
Mergel et al. (2019) highlight that the digital transformation in the public sector
is a complex and multifaceted process that demands a strategic approach to address
evolving citizen expectations and achieve critical objectives, such as enhanced efficiency,
transparency, and citizen satisfaction. This study underscores the necessity for public
administrators to implement clearly defined processes and frameworks while navigating
the challenges inherent in the implementation phase to effectively achieve the intended
outcomes of the digital transformation. This ongoing challenge is further emphasized by
the OECD’s Framework for Digital Talent and Skills in the Public Sector, which stresses
the need for cultivating digital competencies among public sector employees to facilitate
the transition from e-Government to digital government. This report outlines strategies for
developing a digitally skilled workforce capable of navigating and adapting to the rapidly
evolving technological landscape.
The existing research highlights that integrating AI into public administration activ-
ities introduces multiple vulnerabilities that must be carefully managed to ensure both
efficiency and security (Habbal et al., 2024; Ahmad et al., 2022; Khan & Parkinson, 2018).
A primary concern is the susceptibility of AI systems to cyberthreats, which can compro-
mise the integrity of administrative decision-making processes. Contemporary studies
emphasize that cyberdefense strategies should address both infrastructure and control
Adm. Sci. 2025, 15, 149 7 of 23

mechanisms to mitigate these evolving risks (Febiandini & Sony, 2023). Consequently,
public administrators must proactively identify and address these vulnerabilities, imple-
menting strategic measures to protect the public’s trust in AI-driven systems. Although
AI has the potential to enhance efficiency, transparency, and decision making in the public
sector, its adoption also raises ethical, regulatory, and workforce-related challenges. A
comprehensive approach that balances technological innovation with risk mitigation is
essential for sustainable AI integration. The success of AI use in public administration
depends on the development of robust governance frameworks that mitigate risks while
maximizing the technological potential (Febiandini & Sony, 2023).
Some studies reveal that the “integration of digital technology” dimension of DESI
evaluates the adoption of digital technologies, including the use of AI (Csiszár, 2023;
Almeida de Figueiredo, 2024; Kovács et al., 2022). This dimension focuses on how busi-
nesses and public institutions leverage digital tools to enhance productivity, streamline
operations, and foster innovation. The increasing use of AI-driven automation, big-data
analytics, and cloud computing underscores the significance of the digital transformation
in economic and governance contexts. The DESI framework provides valuable insights
into how the AI-driven digital transformation impacts governance and economic develop-
ment. Numerous studies have examined the influences of digitalization and AI adoption
on economic growth. Research indicates that investing in digital infrastructure and AI
technologies boosts productivity, stimulates innovation, and enhances economic competi-
tiveness (Chu et al., 2024; Habibi & Zabardast, 2020). Furthermore, other scholars highlight
that countries with higher levels of digital adoption often experience accelerated economic
growth, driven by improved labor efficiency, increased entrepreneurship, and technological
advancements (Magoutas et al., 2024; Salas-Guerra, 2021). Overall, the literature indicates
that advancements in governance are strongly connected to AI adoption and the digital
transformation. AI has the potential to enhance the public sector’s transparency, miti-
gate corruption, and improve service efficiency through data analytics and automation
(Grimmelikhuijsen & Tangi, 2024; Straub et al., 2023).
Although there has been substantial research on AI adoption in the private sector
(Selten & Klievink, 2024; Wiesmüller et al., 2023), empirical studies examining its role in
public administration remain sparse. Specifically, the existing literature on AI adoption in
governance focuses primarily on private sector efficiencies and lacks an understanding
of the institutional, organizational, and cultural challenges unique to the public sector
(Kumar et al., 2021). Additionally, although technology adoption frameworks, like the TOE
and UTAUT, have been widely used to examine digital technologies, their application to
AI in public governance is underexplored. Furthermore, AI governance models, which
emphasize accountability, transparency, and ethical implications, have yet to be adequately
applied to the public sector context. This study addresses these gaps by applying these the-
oretical frameworks to explore the adoption of AI in public administration and developing
a conceptual model for its integration into governance structures.

3. Samples and Data and Methodology

3.1. Samples and Data
Given that DESI variables, such as human capital, connectivity, the integration of
digital technology, and digital public services, act as critical enablers for AI adoption in
public administration, this paper establishes connections among AI integration and measur-
able DESI components, governance enhancements, and economic advantages. It provides
a comprehensive framework to discuss the integration of AI into public administration
activities, focusing on the associated challenges and vulnerabilities.
Adm. Sci. 2025, 15, 149 8 of 23

The manuscript employs DESI indicators as a proxy for AI adoption in public ad-
ministration because of their comprehensive measurements of the digital infrastructure,
e-Government services, and citizens’ and public servants’ digital skills—the key enablers
of the AI-driven transformation. DESI’s specific focuses on e-Government services and the
digitalization of the public sector’s functions make it an appropriate tool for assessing AI’s
role in governance. Furthermore, as AI adoption requires a foundation of digital readiness
across governmental institutions, businesses, and citizens, DESI’s multidimensional ap-
proach to the digital transformation offers a robust framework for evaluating AI integration.
Its focus on digital capabilities aligned with the foundational requirements for AI to be
effectively implemented in public governance, making it a relevant and validated proxy
for understanding AI’s impacts on governance and economic benefits. AI is not just a tool
but also a transformative force that can address governance challenges, improve service
delivery, and enhance the public sector’s efficiency.
The variables desi_hc, desi_conn, desi_idt, and desi_dps are related to DESI, a tool
developed by the European Commission to assess digital competitiveness among EU coun-
tries. The first variable, desi_hc (human capital), measures digital skills and individuals’
abilities to engage in the digital economy and society. This encompasses both basic digital
literacy, such as the percentage of individuals with fundamental digital skills and their
use of the internet for communication, information retrieval, and social networking, and
advanced skills, including the number of ICT (information and communications tech-
nology) specialists in the workforce and the number of graduates in science, technology,
engineering, and mathematics (STEM) fields. A robust human capital foundation is critical
for ensuring that both the workforce and public administration are prepared for the digital
transformation. Conversely, low scores in this area may signal significant obstacles to
economic growth because of insufficient digital literacy or advanced skills.
The second variable, desi_conn (connectivity), evaluates the deployment and adoption
of broadband infrastructure as well as the quality of internet connections. It focuses on
the availability, quality, and affordability of broadband services, which are critical for a
robust digital infrastructure. This variable is structured into three key subcategories: fixed
broadband coverage, which includes the availability of broadband at basic speeds and
the coverage of ultra-fast broadband, mobile broadband, which examines the penetrations
of 4G and 5G networks and the adoption of mobile broadband services by users, and
affordability, which assesses the cost of broadband subscriptions relative to income. High-
quality connectivity is indispensable for enabling digital services, supporting remote work,
and driving economic competitiveness. However, inadequate connectivity can deepen the
digital gap, especially in rural or underserved areas.
The third variable, desi_idt (integration of digital technology), assesses the extent
to which businesses incorporate digital technologies into their operations, including e-
commerce and cloud services. This variable highlights two key areas: digital transformation
in businesses, which focuses on the adoption of advanced technologies, such as cloud
computing, big data, AI, and the use of enterprise resource planning (ERP) software to
enhance operational efficiency and decision making. It also includes e-commerce, which
measures the proportion of small and medium-sized enterprises (SMEs) engaging in
online sales, including cross-border transactions, and the revenue generated from these
activities. In the context of the public administration, the integration of AI and other digital
technologies offers transformative potential. For instance, AI can streamline administrative
processes, improve service delivery, and enable data-driven decision making. The adoption
of cloud computing and big-data analytics can enhance operational efficiency and scalability
in government services, while the principles of e-commerce, such as seamless online
transactions, can be applied to improve citizen engagement and access to public services.
Adm. Sci. 2025, 15, 149 9 of 23

This synergy underscores the importance of the digital transformation in both the private
and public sectors.
The final component of DESI is desi_dps (digital public services), which emphasizes
the digitization of public services, including e-Government and e-Health systems. This
component is divided into two subcategories: e-Government and e-Health. The first one
assesses the availability of online public services for citizens and businesses, as well as
the ease in accessing these services digitally (e.g., tax filing and document requests). The
second one evaluates the availability of e-Health services, such as online consultations
and electronic health records, and it tracks the use of these services by citizens. The digiti-
zation of public services plays a critical role in integrating AI into public administration
because digitized public services, powered by AI, enhance operational efficiency, minimize
bureaucracy, and improve accessibility, making government services more effective and
citizen centric.
All the variables included in the analysis are presented in Table 1. Table 2 presents
the summary of the statistics and provides an overview of the distribution of these vari-
ables, including measures of the mean, standard deviation, minimum and maximum
values, allowing for a better understanding of their dynamics and overall trends in
governance performance.

Table 1. Variables employed in the analysis.

Name Code Source Definition

Variables employed in the regression analysis
Using the World Bank database, it is calculated through a
Good factor analysis methodology and evaluates the quality of
World Bank
Governance GGOV governance across various domains, including
Database
Status democracy, the rule of law, public service delivery, and
citizen participation.
Long-term
World Bank GDP per capita, measured in purchasing power parity
Economic ECGR
Database (PPP) (constant 2011 international currencies).
Growth
Eurostat—European
Measures digital skills, including basic and advanced
Human Capital desi_hc Commission
digital competencies.
Database
Eurostat—European
Measures the availability, quality, and affordability of
Connectivity desi_conn Commission
broadband and 5G networks.
Database
Integration of Eurostat—European
Evaluates how businesses adopt digital technologies,
Digital desi_idt Commission
including cloud computing, big data, and e-commerce.
Technology Database
Eurostat—European
Digital Public Measures the availability and quality of e-Government
desi_dps Commission
Services services, such as online public services and open data.
Database
Graduates in tertiary education, science, math,
Eurostat—European
computing, engineering, manufacturing, and
Education educ Commission
construction, by sex—per 1000 of the population aged
Database
20–29.
Foreign Direct
Investment, Net
World Bank Direct investment equity flows in the reporting economy
Inflows fdini
Database as a percentage of the GDP (%).
(Percentage of
GDP)
Adm. Sci. 2025, 15, 149 10 of 23

Table 1. Cont.

Name Code Source Definition

Variables employed in the factor analysis (GGOV)
Name Code Source Definition
Measures the extent to which public power is exercised
for private gain, including petty and grand corruption, as
Control of World Bank
CCOR well as the effectiveness of policies and institutions in
Corruption Database
preventing and addressing corruption in government,
the judiciary, and public services.
Measures the extent to which legal frameworks are
World Bank enforced, property rights are protected, courts are
Rule of Law RLW
Database independent, contracts are upheld, and crime and
corruption are controlled.
Measures the quality of public services, policy
Government World Bank formulation and implementation, the competence of civil
GEF
Effectiveness Database servants, and the government’s commitment to policies
that support development.
Political Stability
Captures the likelihood of political instability,
and the Absence World Bank
PSAV government overthrow by unconstitutional means, and
of Vio- Database
the presence of violence or terrorism.
lence/Terrorism
Measures the government’s ability to formulate and
Regulatory World Bank enforce sound policies and regulations that promote
RQ
Quality Database private sector development, market efficiency, and
economic growth.
Measures the extent to which citizens can participate in
Voice and World Bank selecting their government; enjoy freedoms of expression,
VA
Accountability Database association, and media; and have access to transparent
and accountable governance.

Table 2. Descriptive statistics for variables employed in the analysis.

Variable Obs. Mean Std. Dev. Min. Max.

desi_hc 162 45.64667 9.417707 27.47616 71.39063
desi_conn 162 37.61553 12.82175 12.67195 77.08926
desi_idt 162 29.49816 10.40716 10.11913 59.08657
desi_dps 162 57.30215 16.74399 7.412362 91.17917
educ 162 18.49383 6.499935 3.8 40.3
fdini 162 7.466063 24.42403 −40.08106 163.0436
GGOV 162 8.023109 1.132001 −2.013542 1.679326
ECGR 162 52,226.03 22,313.18 25,874.21 137,947.3

Our results show that the good governance status (GGOV) appears to have a negative
minimum value (−2.013542), suggesting governance challenges in Bulgaria in 2022 and
highlighting that governance in this country faced significant difficulties in this year,
potentially because of political instability, corruption, weak institutional effectiveness, and
challenges in upholding democratic principles and the rule of law (Bulgaria held its third
parliamentary election in less than two years on 2 October 2022). In contrast, in 2021, France
recorded the highest good governance status (GGOV) value at 1.679326, indicating strong
Adm. Sci. 2025, 15, 149 11 of 23

institutional effectiveness, political stability, adherence to the rule of law, and low levels
of corruption. A high level was also recorded in 2020 (1.651972), indicating that France’s
strong governance performance during that year, despite the pandemic, was driven by
effective crisis management, stable political leadership, economic recovery measures, and a
commitment to the rule of law. This view is further supported by the literature, including
(Hill et al., 2020).
The fdini variable exhibits a broad range (from −40.08106 to 163.0436) and a high
standard deviation (24.42403), indicating substantial variation across countries. The lowest
level of foreign direct investment (FDI) net inflows (percentage of GDP) was recorded
in Hungary in 2018 (−40.08106), while the highest level was observed in Cyprus in 2019
(163.0436). The DESI variables (desi_hc, desi_conn, desi_idt, and desi_dps) appear to mea-
sure different aspects of digital governance, with varying means and standard deviations.
The educ variable has a mean of 18.49, indicating an average level of education in the
dataset, but with a wide range (from 3.8 to 40.3), suggesting disparities in education levels.
In terms of the good governance status, the variables employed in the analysis are
the six dimensions of governance identified by the World Bank, which include voice and
accountability, political stability and the absence of violence/terrorism, government effec-
tiveness, regulatory quality, the rule of law, and the control of corruption. According to
the literature, AI enhances public administration by improving efficiency, transparency,
and service delivery, but its integration requires ethical governance to address bias, ac-
countability, and privacy concerns (Ansell & Torfing, 2022; Zuiderwijk et al., 2021). AI in
public administration presents several legal and ethical issues that directly impact good
governance. These issues influence transparency, accountability, fairness, and trust in gov-
ernment institutions. In terms of the key concerns related to data privacy and protection,
AI systems rely on vast amounts of personal data, raising concerns about compliance with
privacy laws. The GDPR in the EU represents an example in this regard, meaning that
AI-driven public administration must adhere to strict regulations ensuring data security,
user consent, transparency, and the right to be forgotten. This means that governments and
AI developers must implement robust data governance frameworks to prevent unautho-
rized data collection, minimize risks of data breaches, and uphold citizens’ fundamental
rights to privacy and personal data protection. Governments must ensure that AI does
not unlawfully collect or misuse citizens’ data. Moreover, legal frameworks must require
fairness audits and anti-discrimination measures to prevent AI algorithms from reinforcing
existing biases, which could lead to discriminatory outcomes in the management of public
services, such as welfare distribution. Additionally, AI implementation in public admin-
istration raises cybersecurity risks, as these systems are vulnerable to cyberattacks that
could compromise sensitive data and disrupt essential services. Other critical concerns are
accountability and liability—if an AI system makes a harmful decision, such as wrongfully
denying social benefits, determining responsibility can be complex, whether it lies with
the AI developer, the government agency, or a third party. On the other hand, in terms of
ethical issues, AI should not reinforce social inequalities. Ethical governance ensures that
AI systems promote inclusivity and fairness in the decision-making process, the public’s
trust, and acceptability, and it must balance security with respect for civil liberties.

3.2. Empirical Framework and Methodology

To achieve the objectives of a robust governance framework and effectively manage
crises, it is essential to empower individuals, governments, and policymakers with precise
decision competences. However, the primary focus must be on identifying the key factors
that mitigate challenges in public administration. A review of the theoretical background
reveals that although most studies propose comprehensive frameworks for integrating AI
Adm. Sci. 2025, 15, 149 12 of 23

into public administration processes, few address the associated challenges and vulnerabili-
ties. AI is not merely a tool but also a transformative force capable of addressing governance
challenges, enhancing service delivery, and improving the public sector’s efficiency.
This study develops a theoretical framework to assess the relationships among AI
integration and governance improvements and economic benefits, measurable by DESI
components. By analyzing both the challenges and opportunities of AI integration into
public administration processes, while carefully considering legal and ethical implications,
we propose a comprehensive decision-making framework. This framework examines the
interplay between digital competitiveness and good governance, as well as the link between
digital competitiveness and economic growth.
The model incorporates the key explanatory variables that influence digital com-
petitiveness and economic growth. To address issues of skewed distribution, eliminate
orthogonality among components, and generate independent factors, the GGOV variable
was derived using exploratory factor analysis (EFA). The dependent variables in the model
are GGOV and economic growth (ECGR), both expressed as functions of DESI components,
including human capital (desi_hc), connectivity (desi_conn), the integration of digital
technology (desi_idt), and digital public services (desi_dps). Additionally, the education
level (educ) and foreign direct investment inflows (fdini) are included as key determinants,
reflecting their impacts on governance and economic performance.
The selection of the control variables in our analysis is grounded in their established
relevance to the digital transformation and governance outcomes. Specifically, foreign
direct investment (FDI) inflows are included, as they play pivotal roles in facilitating tech-
nological diffusion, enhancing institutional quality, and introducing innovative business
practices. Prior research has indicated that FDI serves as a conduit for advanced tech-
nologies and managerial knowhow, which can accelerate the adoption of digital tools
and AI within both the private and public sectors (Habibi & Zabardast, 2020; Magoutas
et al., 2024). By controlling for FDI, we account for external economic influences that may
affect both governance performance and economic growth independently of domestic
digitalization efforts.
The timeframe of 2017–2022 was purposefully selected to reflect a period marked
by significant digital transformation initiatives within the European Union. This period
captures the implementation of critical EU-level strategies, including the Digital Single
Market framework, and coincides with the early phases of the Digital Decade Policy Pro-
gramme 2030. Moreover, it encompasses the unprecedented acceleration of digitalization
prompted by the COVID-19 pandemic, which necessitated rapid adaptation in public
administration through remote service delivery and expanded e-Government solutions
(Alkhawaldah et al., 2024; Rodrigues, 2020). Focusing on the EU context is particularly
valuable, given the region’s strong regulatory environment for AI, commitment to ethical
digital governance, and the availability of robust, harmonized data through the DESI
indicators. The diversity of the digital readiness across EU member states further enables
a nuanced analysis of how varying levels of digital maturity interact with governance
outcomes and economic performance.
We employ the ordinary-least-squares (OLS) regression and factor analysis methodol-
ogy using the following specification:

Yit = c0 + c1 × desi_hci,t + c2 × desi_conni,t + c3 × desi_idti,t + c4 × desi_dpsi,t + c5 × educi,t +

(1)
c6 × fdinii,t + ci + εi,t

where
Adm. Sci. 2025, 15, 149 13 of 23

• Yit represents the dependent variable for country i at time t. Specifically, we focus on
two dependent variables: GGOV, which measures the efficiency of public services, the
corruption perception index, and citizens’ satisfaction, and ECGR, which is measured
by GDP per capita and assesses the standard of living and the overall economic
performance of a nation;
• desi_hci,t is the DESI human capital score for country i at time t;
• desi_conni,t represents the DESI connectivity score for country i at time t;
• desi_idti,t measures the DESI integration-of-digital-technology score for country i at
time t;
• desi_dpsi,t is the DESI digital-public-service score for country i at time t;
• educi,t represents the status of graduates in tertiary education for country i at time t;
• fdinii,t is foreign direct investment equity flows in the reporting economy.
The GGOV variable was derived using EFA, a statistical technique that identifies
underlying latent factors from observed variables. This approach mitigates issues related
to skewed distribution, eliminates orthogonality among components, and generates inde-
pendent factors, ensuring a more robust and interpretable measure of governance quality.
Factor analysis works by identifying a smaller set of common factors (q) that can effectively
represent the variance in a more extensive set of original variables (p). By reducing the
dimensionality, it enhances the model’s efficiency while preserving the essential informa-
tion. This method is particularly useful in governance studies, where multiple interrelated
indicators, such as the public service’s efficiency, corruption perception, and citizens’ satis-
faction, in our case, can be condensed into a single composite measure, improving both
analytical clarity and statistical reliability.

Yij = Zi1 b1j + Zi2 b2j + Zi3 b3j + ...Z iq bqj + eij (2)

In this context, Yij represents the value of the ith observation for the jth variable, while
Zik denotes the ith observation for the kth common factor. The term bqj refers to the set of
linear coefficients, known as factor loadings, which indicate the strength and direction of
the relationship between the observed variables and the underlying latent factors. Finally,
eij represents the unique factor associated with the jth variable, capturing the variance
that is not explained by the common factors. Factor analysis assumes that each observed
variable can be expressed as a linear combination of a smaller number of latent factors
plus an error term. This technique is particularly useful for reducing dimensionality and
identifying hidden structures within the data, making it a valuable tool in governance and
economic studies.
The independent variables used in the analysis are summarized in Table 1. To estimate
the relationships among the governance quality, economic growth, and digital competi-
tiveness, we employ a fixed-effect model, which controls for unobserved heterogeneity
across countries and over time. The general specification of the model is described by the
following equation:
Y i,t = αi + Xi,t β + ε i,t (3)

where Yi,t represents the dependent variable for country i at time t, capturing either GGOV
or ECGR. The term αi denotes an unobserved country-specific constant, accounting for
time-invariant heterogeneity across countries. Xi,t is the matrix of time-variant explanatory
variables, including DESI components, education level, and foreign direct investment
inflows. Finally, ε i,t is the error term, capturing unobserved factors and random shocks.
Using a panel data model, we assess whether a fixed- or a random-effect approach is
appropriate. Fixed effects remain constant across individuals, while random effects vary.
To ensure the suitability of the fixed-effect model, we conducted the Hausman test, which
Adm. Sci. 2025, 15, 149 14 of 23

confirmed the model’s validity. To ensure comparability and robustness in governance

assessments, GGOV was computed following the normalization procedure (Equation
(4)) validated by Eck and Waltman (2009). This method standardizes indicators, allowing
for meaningful cross-country comparisons while mitigating scale distortions. Similar
approaches have been widely used in institutional quality research (Kaufmann et al., 2010)
and digital competitiveness studies (Desai et al., 2002). By employing this methodology,
we ensure that the governance performance is measured in a consistent and statistically
sound manner.
∑n Wt × Vt
M = t=1n (4)
∑t=1 Wt
M = average value;
V = actual value;
W = weighting factor;
N = number of periods in the weighting group.

xij− x j
Zij = (5)
sj

Xij = data for variable j in sample unit i;

x j = sample mean for variable j;
sj = sample standard deviation for variable j.
The normalization procedure plays a crucial role in ensuring that governance indi-
cators are comparable and statistically robust across different countries and periods. By
standardizing the data, this method eliminates distortions caused by differences in mea-
surement scales, allowing for a more accurate assessment of governance performance.
Equation (4) represents a weighted mean computation, where individual values (Vt) are
weighted by a factor (Wt), ensuring that more relevant or reliable indicators contribute
proportionally to the final governance score. By applying these formulae, we obtain a com-
prehensive and statistically sound governance index, which enhances the comparability,
consistency, and robustness of governance assessments across EU countries. Although the
selected statistical techniques are well suited for our research objectives, we acknowledge
several inherent limitations. Ordinary-least-squares (OLS) regression, used as an initial esti-
mation method, assumes no endogeneity or omitted variable bias, which may be challeng-
ing in studies of the digital transformation where policy feedback loops exist. To address
this, we prioritize fixed-effect models, which control unobserved, time-invariant hetero-
geneity across countries. However, fixed-effect estimations cannot capture time-variant
omitted variables and reduce efficiency when between-country variations predominate.
Additionally, in constructing the composite governance index (GGOV), we employ factor
analysis to synthesize multiple governance dimensions. Although this approach effectively
reduces the dimensionality, it assumes linear relationships between indicators and requires
subjective judgment in factor interpretation. Despite these limitations, combining these
methods offers a robust analytical framework aligned with the structure of our dataset and
research questions.

4. Results
The main results of our paper are presented in Table 3. We present the results of
the fixed-effect regression, showcasing two models: Model 1 (GGOV-DESI) and Model 2
(ECGR-DESI). These models examine the impacts of various digital and economic indicators
on good governance (GGOV) and economic growth (ECGR) using pooled OLS, random-
effect, and fixed-effect estimations. We emphasize the importance of evaluating the impacts
of digital and economic factors on governance and growth, as these indicators offer valuable
Adm. Sci. 2025, 15, 149 15 of 23

insights into AI’s roles in public administration. In this regard, AI acts as a crucial link
between the digital transformation and governance efficiency, influencing policies and
decision-making processes that shape institutional quality and economic performance.
Using a dataset of 27 European countries from 2017 to 2022, we document that digital
public services and digital technology integration play crucial roles in governance and
economic growth.

Table 3. Fixed-effect regression results.

Model 1 (GGOV-DESI) Model 2 (ECGR-DESI)

Variable Random Random
Pooled OLS Fixed Effect Pooled OLS Fixed Effect
Effect Effect
0.025 0.001 −0.005 1.696 369.2 83.52
desi_hc
(1.59) (0.07) (0.46) (5.86) ** (1.53) (0.32)
0.004 −0.001 0.002 207.0 83.49 88.50
desi_conn
(0.53) (0.10) (0.04) (1.41) (1.65) (1.74)
0.026 0.012 0.012 238.1 372.6 366.7
desi_idt
(1.85) (2.11) * (2.12) * (0.91) (2.74) ** (2.66) **
0.011 0.009 0.008 −88.28 276.8 327.3
desi_dps
(1.37) *** (1.78) ** (1.60) ** (0.57) (2.28) * (2.60) *
−0.014 −0.013 −0.013 −346.5 119.3 136.9
educ
(1.08) (1.87) (1.90) (1.46) (0.72) (0.81)
−0.002 0.000 0.001 107.5 −8.082 −7.106
fdini
(0.47) (0.35) (0.46) (1.78) (0.67) (0.59)
−1.124 0.376 0.589 −15.39 25.13 34.59
Cons
(2.51) * (0.93) (1.56) (1.83) (2.75) ** (3.79) **
N 162 162 162 162 162 162
R2 0.21 0.76 0.78 0.38 0.33 0.34
Note: This table presents the results of the fixed-effect panel model. All the variables are defined in Table 1.
Standard errors are shown in parentheses, and ***, **, and * indicate statistical significances at the 1%, 5%, and
10% levels, respectively.

Digital public services (desi_dps) are significant factors in both models, indicating
that enhanced digital public services contribute positively to governance and economic
growth in EU countries. In Model 1, they demonstrate strongly positive effects across
all the estimations, while in Model 2, they remain significant, with positive coefficients
in both the random- and fixed-effect models. The impacts of desi_dps can be further
understood through its subcomponents, such as e-Government services, digital healthcare,
online public service accessibility, and open data initiatives. These elements collectively
enhance institutional efficiency, transparency, and citizen engagement, reinforcing the link
between digitalization and economic performance. The relationships among the desi_dps
components, such as e-Government services, digital healthcare, online public service
accessibility, open data initiatives, and economic growth, have been widely explored
in the literature. Studies suggest that well-developed e-Government services enhance
administrative efficiency, reduce bureaucratic costs, and foster business competitiveness by
streamlining the public sector’s interactions (Alkhawaldah et al., 2024; Rodriguez, 2022).
Furthermore, the availabilities of online public services and open data foster transparency,
strengthen institutional trust, and support innovation-driven economic activities. Empirical
research supports these claims, demonstrating that countries with advanced digital public
services tend to experience higher economic growth rates because of increased efficiency in
service delivery, reduced transaction costs, and improved public-sector performance (Zhao
Adm. Sci. 2025, 15, 149 16 of 23

et al., 2015). These findings validate the crucial roles of digital public services in shaping
governance efficiency and economic development across EU nations.
The integration of digital technology (desi_idt) is significant and positive in Model
1, indicating that adopting and utilizing digital technologies contribute to governance im-
provements by enhancing administrative efficiency, transparency, and service delivery. The
first model confirms the first hypothesis and reveals a positive and statistically significant
relationship between the level of digital public services (measured by DESI components)
and the quality of governance in EU countries. In Model 2, desi_idt also remains positive
and significant, confirming the second hypothesis of our study and suggesting that higher
levels of digital technology integration may positively influence economic growth by fos-
tering innovation, improving productivity, and enabling digital business transformation.
The literature supports these findings, emphasizing that increased adoption of digital tech-
nology, such as cloud computing, big-data analytics, and artificial intelligence, enhances
the public and private sectors’ performances (Criado & Gil-Garcia, 2019). In governance,
digital technology streamlines decision making, reduces corruption risks, and strengthens
institutional responsiveness (Das, 2024). From an economic perspective, widespread digital
adoption lowers transaction costs, facilitates market expansion, and boosts competitive-
ness by enabling firms to leverage automation and data-driven strategies (Suoniemi et al.,
2020). Additionally, digital technology integration is crucial in bridging regional disparities
within the EU, as more digitally advanced economies tend to experience stronger economic
growth, higher employment rates, and improved resilience against economic shocks. These
insights highlight the dual roles of desi_idt in shaping both governance efficiency and
economic development across EU countries.
Our results support the agenda of the European Commission, notably the Digital
Decade Policy Programme 2030, which emphasizes the crucial role of the digital trans-
formation in modernizing public administration. This program sets ambitious targets for
digitalizing key sectors, including e-Government, digital public services, and AI-driven
governance, to enhance efficiency, transparency, and citizens’ engagement across EU mem-
ber states. By highlighting the positive impacts of digital technology and digital public
services on governance and economic growth, our findings align with Europe’s 2030 ob-
jectives and targets, focusing on four key pillars: digital skills, digital infrastructure, the
digitalization of businesses, and digital public services. EU countries with higher levels of
digital technology integration, such as Denmark, Estonia, and Finland, have successfully
implemented advanced e-Government services, leading to greater administrative efficiency,
reduced bureaucratic burdens, and increased citizen engagement. This demonstrates that
the digital transformation is crucial in strengthening institutional capacity, improving the
public sector’s performance, and fostering economic resilience. Moreover, the success of
these countries suggests that wider adoption of digital governance strategies across the
EU could drive similar benefits, including enhanced transparency, better public service
accessibility, and more efficient policy implementation. As a result, investing in digital
infrastructure and promoting digital skill development will be essential for all EU nations
to fully leverage the potential of digitalization in governance and economic growth.
Although this discussion has emphasized the potential benefits of AI adoption in
public governance, such as enhanced efficiency, improved decision making, and greater
transparency, it is equally important to acknowledge the significant challenges and risks
accompanying these advancements. Algorithmic bias poses a serious concern, particularly
in public service delivery, where opaque decision-making processes can unintentionally re-
inforce social inequalities (O’Neil, 2017). Additionally, AI adoption brings about substantial
workforce implications, including job displacement and the need to rapidly reskill public
sector employees to manage and supervise AI-driven processes (Acemoglu & Restrepo,
Adm. Sci. 2025, 15, 149 17 of 23

2020). Ethical and regulatory shortcomings further complicate AI integration, as existing le-
gal frameworks often lag behind technological innovations, creating gaps in accountability
and oversight (Cath, 2018). These challenges highlight the necessity of a balanced approach
to AI governance—one that not only leverages the transformative potential of AI but also
proactively addresses its ethical, social, and regulatory risks. Incorporating comprehensive
risk management strategies and fostering a culture of algorithmic transparency will be
essential for sustainable and equitable AI deployment in the public sector. For instance, in
the United Kingdom, implementing AI and automated systems in administering Universal
Credit (a welfare benefit system) has faced significant challenges. AI tools used to process
claims and assess eligibility have been criticized for creating errors that disproportionately
impact vulnerable populations. For example, in 2018, reports of AI-driven errors in assess-
ing claims led to payment delays, causing hardship for many claimants. Some individuals
were wrongly categorized as ineligible, while others faced incorrect sanctions for failing
to meet requirements. These failures highlight the risks of relying on AI systems without
adequate human oversight, especially when dealing with individuals’ welfare and financial
stability. The lack of transparency in the algorithmic decision making further fueled public
concern over the system’s fairness.
Digital tools, including open data portals and AI-powered analytics, play vital roles in
enhancing government accountability by increasing transparency in financial transactions,
procurement processes, and policy decisions. These technologies enable real-time moni-
toring, fraud detection, and data-driven decision making, reducing corruption risks and
improving the public’s trust in institutions. In line with this, the EU’s Open Data Directive
promotes the reuse of public sector data, facilitating greater accessibility, interoperability,
and innovation in governance. By making high-value datasets available, the directive
supports data-driven policymaking, public-sector efficiency, and private-sector innovation,
fostering a more open and participatory digital economy. Additionally, initiatives such as
the European Data Strategy and the Common European Data Spaces further strengthen
the EU’s commitment to leveraging data for better governance, economic growth, and
societal progress.
However, although the integration of digital technology (desi_idt) positively and
significantly impacts governance and economic growth, it introduces ethical dilemmas,
legal complexities, and security risks. First, governments must adhere to the General Data
Protection Regulation (GDPR) when handling citizens’ data, ensuring lawful processing,
consent mechanisms, and data security. Second, increased digitalization exposes public
administration to cyberattacks, ransomware threats, and data breaches, meaning that le-
gal frameworks must continuously evolve to address emerging cybersecurity and digital
sovereignty threats. Third, even if the EU’s Open Data Directive promotes transparency,
ensuring fair usage of public sector data while protecting sensitive information remains a
challenge, it is required for balancing open access and intellectual property rights and for
avoiding the exploitation or misuse of public data. Addressing these challenges requires
strong regulatory frameworks, robust cybersecurity measures, ethical AI governance, and
policies prioritizing digital inclusivity and human rights. A well-balanced approach will
ensure the digital transformation benefits all citizens while upholding fundamental legal
and ethical standards. The overall results align with the existing literature, underscoring
the importance of DESI components, such as human capital (desi_hc) and digital public ser-
vices (desi_dps), in driving AI adoption. A well-trained workforce with strong digital skills
(desi_hc) is crucial for the development and management of AI technologies. In contrast,
the availability of AI-powered digital public services (desi_dps) signals the government’s
commitment to incorporating AI into administrative functions (Kovács et al., 2022). Ad-
ditionally, a solid digital infrastructure empowers businesses and public institutions to
Adm. Sci. 2025, 15, 149 18 of 23

effectively utilize AI applications, thereby improving governance and boosting economic

competitiveness (Almeida de Figueiredo, 2024).

5. Conclusions
Integrating AI into public administration processes presents an excellent opportu-
nity to boost government efficiency, transparency, and service delivery. As AI-driven
advancements reshape bureaucratic processes and decision making, they hold the potential
to enhance productivity and drive economic growth. By optimizing resource allocation,
reducing administrative burdens, and improving policy implementation, AI can contribute
to a more dynamic and responsive government. However, this technological shift also
introduces challenges that require careful management. Issues such as data privacy, algo-
rithmic bias, and ethical concerns raise critical questions about the reliability and fairness
of AI in governance. Establishing strong regulatory frameworks and equipping public
officials with the necessary skills are crucial for mitigating these risks. Moreover, AI serves
as both a catalyst for progress and a potential source of complexity, making it essential for
governments to balance innovation with responsibility.
The rationale behind this study is based on the growing importance of the digital
transformation in shaping governance efficiency and economic performance. As countries’
governments increasingly integrate digital technologies, improve connectivity, and develop
digital public services, the ways institutions function and economies grow are significantly
influenced. Our findings underscore the critical roles of digital public services and digital
technology integration in enhancing governance and economic growth across EU countries.
The significance of Digital Public Services (desi_dps) in both our models highlights the posi-
tive impacts of e-Government services, digital healthcare, online public service accessibility,
and open data initiatives on fostering institutional efficiency, transparency, and economic
resilience. Additionally, the positive effect of Digital Technology Integration (desi_idt) rein-
forces the transformative potential of digital tools in streamlining administrative processes,
promoting innovation, and improving the public sector’s performance. These results align
with the European Commission’s Digital Decade Policy Programme 2030, emphasizing
the necessity of digital transformation in modernizing public administration. However,
although digitalization offers substantial advantages, challenges such as cybersecurity
threats, data privacy concerns, and regulatory complexities must be addressed through
robust governance frameworks and ethical AI policies. Overall, our study highlights the
dual roles of digitalization in governance and economic development, reinforcing the need
for EU nations to invest in digital infrastructure, enhance digital skills, and adopt AI-driven
governance strategies. By leveraging digital technologies effectively, policymakers can
strengthen institutional quality, improve public service delivery, and foster sustainable
economic growth in an increasingly digital world.
Importantly, these results matter for several reasons. First, they provide empirical
support for the political and financial investments that EU institutions and member states
are directing toward the digital transformation. By showing a measurable link between
digital public services and governance quality, this study validates current policy directions
to modernize public administration. Second, the positive association with economic growth
highlights that investments in digital public services yield administrative efficiencies and
concrete macroeconomic gains, making a strong case for prioritizing digital infrastructure
in post-pandemic recovery plans and future EU budget allocations. Furthermore, our
findings suggest that digitalization may help to close governance and economic perfor-
mance gaps among EU countries by offering scalable and replicable solutions for public
service delivery. This is particularly relevant for less digitally advanced member states,
where targeted investments could accelerate convergence with more developed peers.
Adm. Sci. 2025, 15, 149 19 of 23

Although we recognize that GDPR compliance, cybersecurity risks, and AI ethics were
discussed qualitatively, our use of DESI subcomponents, such as “Digital Public Services”
and “Connectivity”, is an effective proxy that encapsulates these dimensions, as validated
by the existing literature. Nonetheless, future research should incorporate more granular
indicators, such as AI-specific adoption rates or cybersecurity readiness scores, to deepen
the understanding of these critical aspects. Finally, this research contributes to academic
debates by bridging the gap between theoretical expectations and empirical evidence,
confirming that digitalization is not merely a technological shift but also a transformational
force for governance and economic development. Policymakers are, thus, encouraged to
continue supporting digitalization strategies, not only for their direct administrative bene-
fits but also for their broader roles in driving inclusive growth and democratic resilience
across the EU.
Strengthening cybersecurity measures and ensuring strict compliance with data pro-
tection regulations, such as GDPR, are essential for addressing the growing risks associated
with digitalization. As digital services expand, governments must tackle challenges related
to data security, cyberthreats, and privacy concerns to maintain the public’s trust and insti-
tutional integrity. Additionally, bridging the digital divide through broadband expansion,
digital skills training, and inclusive policies remains a critical issue, as disparities in digital
access can exacerbate social and economic inequalities. Although the digital transformation
presents significant opportunities, it also introduces vulnerabilities, including the risk of
cyberattacks, increased reliance on digital infrastructure, and ethical dilemmas related to
AI governance. To mitigate these risks and maximize the benefits of digitalization, national
strategies should align with the European Commission’s Digital Decade Policy Programme
2030, fostering cross-border digital cooperation, strengthening regulatory frameworks,
and ensuring strategic investments in digital infrastructure. By adopting a balanced ap-
proach that addresses opportunities and challenges, EU countries can enhance institutional
capacity, improve public service delivery, and drive long-term economic resilience in an
increasingly digital world. This study contributes to the growing body of literature by
empirically validating the theoretical claims about the governance-enhancing and growth-
inducing effects of the digital transformation in public administration. For policymakers,
our findings advocate sustained investment in digitalization initiatives. At the same time,
researchers are encouraged to explore further causal dynamics and the roles of emerg-
ing technologies, such as AI, in governance frameworks. Policymakers should prioritize
expanding and enhancing digital public services to improve governance efficiency and
economic growth. Governments must invest in e-Government services, digital healthcare,
and open data initiatives to streamline public administration, enhance transparency, and
foster innovation. Additionally, the integration of digital technology should be encouraged
to boost economic competitiveness by promoting AI adoption, cloud computing, and data
analytics in both the public and private sectors.
Despite these contributions, our study has several limitations. First, although the
dataset covers 27 EU countries from 2017 to 2022, future research could better capture
long-term digitalization trends and the impacts of external shocks, such as economic crises
and geopolitical disruptions, by incorporating extended timeseries data and additional vari-
ables related to political stability, cybersecurity threats, and technological advancements.
Second, although this study relies on the Digital Economy and Society Index (DESI) as a key
measure of digitalization, future studies could integrate alternative indicators or qualitative
assessments to provide a more comprehensive understanding of digital governance. Finally,
exploring the differential effects of digitalization at various administrative levels, such as
national versus regional governments, would offer more profound insights into policy
effectiveness and digital transformation strategies across diverse governance structures.
Adm. Sci. 2025, 15, 149 20 of 23

Further studies could assess the efficacy of specific digital policies, such as AI governance
frameworks, cybersecurity regulations, and digital literacy programs, in enhancing the
public sector’s performance. Comparative analyses between EU and non-EU countries
could provide further insights into best practices and potential challenges in digital gover-
nance. Finally, future research should also examine the ethical and societal implications of
increased AI-driven decision-making processes in governance, ensuring that the digital
transformation aligns with transparency, accountability, and inclusivity principles.

Author Contributions: Conceptual-ization, A.F.V. and M.T.; methodology, A.F.V.; software, A.F.V.
and M.T.; validation, A.F.V. and M.T.; formal analysis, A.F.V.; investigation, M.T.; resources, A.F.V.
and M.T.; data curation, A.F.V.; writing—original draft preparation, A.F.V. and M.T.; writing—review
and editing, A.F.V. and M.T.; visualization, A.F.V.; supervision, M.T.; project administration, A.F.V.;
funding acquisition, M.T. All authors have read and agreed to the published version of the manuscript.

Funding: This research received no external funding.

Institutional Review Board Statement: Not applicable.

Informed Consent Statement: Not applicable.

Data Availability Statement: Publicly available data sets were analyzed in this study. These data can
be found here: https://databank.worldbank.org/home.aspx, https://digital-strategy.ec.europa.eu/
en/policies/desi (accessed on 15 April 2025).

Acknowledgments: The authors acknowledge financial support from the European Commission—
Erasmus Plus Programme, Project ERASMUS-JMO-2022-HEI-TCH-RSCH EUFIRE-RE 101085352—
and the Jean Monnet Center of Excellence European Financial Resilience and Regulation (EUFIRE-RE).

Conflicts of Interest: The authors declare no conflict of interest.

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