Industry 4.0 and Transformation in Public Finance: An Assessment by Government Expenditures

Abstract

The fourth industrial revolution (Industry 4.0) offers a great potential for the transformation of economies and societies. Governments are responsible not only for keeping pace with Industry 4.0 and its underlying technologies, but also for managing this transformation. The aim of this study is to evaluate the possible effects of this phenomenon on public finance in terms of decision making process in public policy and amount and composition of government expenditures. In the light of the assessments based on early stages of the industrial revolution and the distinctive features of the new era, it has been concluded that the phenomenon of Industry 4.0 will have a decreasing effect on the ratio of current expenditures in total government expenditures, an increase effect in the share of social and economic transfer expenditures, and the potential to change the composition of investment expenditures according to economic classification of government expenditures.