The macroeconomic effects of fiscal decentralization reforms in Kazakhstan: Evidence from regional data

Type of the article: Research ArticleAbstractThe paper examines the effects of fiscal decentralization reforms on regional development and governance quality in Kazakhstan. The significance of the study lies in the growing role of fiscal autonomy and local accountability in improving public sector efficiency across emerging economies. The analysis focuses on two major reforms: the introduction of fourth-level local budgets in 2019, which transferred limited financial authority to rural administrations, and the direct election of rural akims (local mayors) between 2021 and 2023, replacing centrally appointed officials. The objective is to assess whether these institutional changes produced measurable macroeconomic effects. Using panel data from 14 regions covering the period 2018–2023, the study applies a difference-in-differences model with regional and temporal fixed effects. The findings indicate that gross regional product (p ≈ 0.09) in reform-affected areas increased by about 12%, while the effects on per capita income (0.8%) and investment (–15%) were statistically insignificant. Subsample analysis shows that the benefits were concentrated in wealthier and administratively stronger regions, suggesting that institutional and fiscal capacity determine how effectively local governments can utilize new powers. The results imply that decentralization can enhance efficiency, transparency, and accountability – but only under “fair game” conditions where regions possess comparable institutional readiness, resources, and access to intergovernmental support. Otherwise, reforms risk widening the gap between advanced and lagging regions. The study thus offers practical insights for policymakers designing fiscal decentralization strategies in transitional economies.