Proceedings of the International scientific and practical conference ―Research Horizons in the Modern World‖ (March 27-29, 2026) / Publisher website: www.naukainfo.com. – Warsaw, Poland, 2026. - 135 p.

131 The economics of artificial intelligence (AI) in the public sector extends beyond the mere ―digitization of processes‖; rather, it encompasses the redistribution of costs and benefits within government decision-making, where the ultimate outcome is the creation of public value rather than profit generation. The fundamental economic implications of AI in the public sector lie in its capacity to transform public value creation mechanisms by reshaping cost structures, increasing productivity, and enhancing decision-making processes. Unlike conventional digital technologies, AI functions not only as a tool for automation but also as a catalyst for qualitative evolution in decision-making, as it reduces the costs associated with prediction, which is a core function of governance [1]. From an economic perspective, the primary impact of AI manifests through the establishment of new complementarities between data, organizational processes, human capital, and control mechanisms. These complementarities determine whether technological deployment translates into tangible economic outcomes. In the public sector, this necessitates the integration of core registries, data standardization, enhanced analytical capabilities, and the transformation of governance protocols. The economic effects associated with the emergence of AI in public administration should be understood as a comprehensive transformation of the frameworks governing public value creation. The efficiency effect reflects cost reduction and improved resource allocation driven by automation and lower transaction costs, although it is constrained by significant integration costs. The effectiveness effect refers to enhanced policy goal attainment through data analytics and algorithmic decision support, which depends on data integrity and the risks of algorithmic inaccuracies. Improvements in the quality of public services are associated with increased accessibility and personalization enabled by digital platforms and AI interfaces; however, these gains are limited by digital inequality and varying levels of public trust. The productivity effect manifests as increased labor efficiency through automation and process optimization, yet it is constrained by institutional resistance and skill shortages.