Even though Kazakhstan is one of the most successful transition countries in Central Asia it has been neglected in the literature on regional convergence. This paper fills this gap with an empirical analysis of the growth process on the regional level using annual gross regional product (GRP) data for the period 1998–2008 for the 16 Kazakh regions. In particular, we look at the sigma- and absolute beta-convergence. Given the growing variation in GRP over time, sigma-convergence cannot be found for Kazakhstan. The data show that there is also no evidence for absolute sigma-convergence. In contrast, the Kazakh regions even seem to diverge.

Carmen Wieslhuber

Miriam Frey

English

Research Papers in Economics

Kurzanalysen Nr. 52
und Informationen August 2011
OSTEUROPA-INSTITUT
REGENSBURG
Kurzanalysen und
Informationen
Nr. 52 August 2011
Landshuter Str.4
93047 Regensburg
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Internet: www.osteuropa-institut.de
Arbeitsbereich Wirtschaft,
Migration und Integration
Do Kazakh Regions Converge?
Miriam FREY and Carmen WIESLHUBER *
Even though Kazakhstan is one of the most successful transition countries in Central Asia it
has been neglected in the literature on regional convergence. This paper ﬁlls this gap with
an empirical analysis of the growth process on the regional level using annual gross regional
product (GRP) data for the period 1998–2008 for the 16 Kazakh regions. In particular, we
look at the - and absolute -convergence. Given the growing variation in GRP over time, -
convergence cannot be found for Kazakhstan. The data show that there is also no evidence for
absolute -convergence. In contrast, the Kazakh regions even seem to diverge.
1 Introduction
Studies on regional convergence within or
across countries have already been com-
pleted for a broad range of regions (Barro and
Sala-i-Martin, 1995). However, none of them
deals with the former Soviet Union coun-
tries in Central Asia. The reason might be
the insufﬁcient or even missing data on these
countries, especially on the regional level. Al-
though we are facing this problem as well, we
want to provide some ﬁrst insights into the re-
gional convergence process with the present
note.
Among the former Soviet Union states in
Central Asia Kazakhstan is the most suc-
cessful economy. During the early 1990s,
it has essentially completed its transitional
phase. A new constitution and legal frame-
work were created and a market economy
as well as a privatized banking system was
established (Agrawal, 2008). In addition, so-
cial problems were tackled. The poverty level
was reduced signiﬁcantly, the unemployment
rate decreased and the educational level was
raised (Ursulenko, 2010).
When looking at the growth process
in Kazakhstan, especially in the period
after 1998 one should take into account the
country’s natural resources, namely oil and
gas,1 which mainly drove this process (see
Figure 1).
* Frey: Osteuropa-Institut Regensburg and University of Regensburg, frey@osteuropa-institut.de; Wieslhuber: Uni-
versity of Regensburg, carmen.wieslhuber@wiwi.uni-regensburg.de. The authors thank Barbara Dietz, Manuela
Troschke and Richard Frensch for helpful comments.
1Note that gas is neglected in the following as it contributes only an inconsiderable part to the total oil and gas
extraction.OSTEUROPA-INSTITUT REGENSBURG
Figure 1: Growth of real GDP due to oil extraction (in percent), 2000–2006
30%
25%
20%
15%
10%
5%
0%
2000 2001 2002 2003 2004 2005 2006
growth due to oil real GDP growth rate
35%
Source: own calculation based on the Statistical Yearbook of Kazakhstan
In 2000, the extraction of oil rose by
approximately 78.7%, which accounted for
22.3% of the total growth of real GDP.2
2 Regional Growth Dynamics
To analyze the regional growth dynamics in
Kazakhstan, data on GRP per capita in US-
Dollar (PPP) is drawn from the National Hu-
man Development Report 2009. It includes
data for the 163 Kazakh regions (oblasti) for
the period 1990–2008. For structural reasons
we start our analysis with the year 1998.
Figure 2 shows the data for each of the
16 Kazakh regions from 1998–2008. At ﬁrst
glance they seem not to converge to a sin-
gle GRP per capita level. Even though all re-
gions started at approximately the same level
in 1998, within only 10 years they reached
levels of per capita GRP which differ by a fac-
tor of almost 12.
Table 1 includes a number of descriptive
statistics for the full sample. The mean of per
capita GRP is always higher than the median.
This is not unexpected because it means that
only very few regions are extremely rich while
most of the oblasti are quite poor. The posi-
tive values of skewness indicate that the dis-
tribution is not symmetric, but skewed to the
right. The long tailed side is the one with
the few high GRPs while the distribution on
the other side is steep. The differences com-
pared to the standard Gaussian distribution
can also be seen in the kurtosis, which im-
plies a long thin tail on the right side of the
distribution.
2The real GDP grew by 24.4%.
3Kazakhstan can be devided in 14 administrative provinces and two major cities (Almaty and Astana).
Kurzanalysen 2
und InformationenCovergence across Kazakh Regions
Figure 2: Per capita GRP for the 16 Kazakh regions in USD (PPP), 1998–2008
0
5000
10000
15000
20000
25000
30000
35000
199820002002200420062008
Akmola
0
5000
10000
15000
20000
25000
30000
35000
199820002002200420062008
Aktyubinsk
0
5000
10000
15000
20000
25000
30000
35000
199820002002200420062008
Almaty
0
5000
10000
15000
20000
25000
30000
35000
199820002002200420062008
Atyrau
0
5000
10000
15000
20000
25000
30000
35000
1998 2000 2002 2004 2006 2008
Eastern Kazakhstan
0
5000
10000
15000
20000
25000
30000
35000
199820002002200420062008
Zhambyl
0
5000
10000
15000
20000
25000
30000
35000
1998 2000 2002 2004 2006 2008
Western Kazakhstan
0
5000
10000
15000
20000
25000
30000
35000
199820002002200420062008
Karaganda
0
5000
10000
15000
20000
25000
30000
35000
199820002002200420062008
Kostanay
0
5000
10000
15000
20000
25000
30000
35000
199820002002200420062008
Kyzylorda
0
5000
10000
15000
20000
25000
30000
35000
199820002002200420062008
Mangistau
0
5000
10000
15000
20000
25000
30000
35000
199820002002200420062008
Pavlodar
0
5000
10000
15000
20000
25000
30000
35000
1998 2000 2002 2004 2006 2008
North Kazakhstan
0
5000
10000
15000
20000
25000
30000
35000
1998 2000 2002 2004 2006 2008
South Kazakhstan
0
5000
10000
15000
20000
25000
30000
35000
1998 2000 2002 2004 2006 2008
Astana City
0
5000
10000
15000
20000
25000
30000
35000
1998 2000 2002 2004 2006 2008
Almaty City
Source: own illustration based on UNDP 2009
Table 1: Summary statistics of the GRP per capita in USD (PPP)
N Median Mean SD Skewness Kurtosis
1998 16 4688 4825.1875 2590.2118 0.7147 2.6278
1999 16 4370 4893.5625 2844.9505 0.7498 2.3221
2000 16 4376 5387.625 3803.0906 1.3096 4.0082
2001 16 4834 6193.6875 4296.2157 1.2990 3.9281
2002 16 5334.5 7133.5 5433.6918 1.3878 4.0515
2003 16 5933 7996.875 6419.6702 1.6431 5.215
2004 16 6345 8955.1875 6787.1121 1.2434 3.756
2005 16 7308.5 10020.5 7876.555 1.092 2.9952
2006 16 8252 11124.3125 9037.425 1.0825 2.9157
2007 16 9539 11946.75 8532.4518 0.9556 2.5943
2008 16 11148 12863.375 9543.4767 1.1446 3.4488
1998–2008 176 5817 8303.6688 6935.8042 1.7264 5.6513
Source: own calculations based on UNDP 2009
3 Nr. 52
August 2011OSTEUROPA-INSTITUT REGENSBURG
3 -convergence
Following Barro and Sala-i-Martin (2004), -
convergence occurs if the cross sectional dis-
persion of GDP (GRP) decreases over time.
It is measured as the standard deviation of
the annual log growth rate of GRP.
Figure 3 shows the cross-sectional stan-
dard deviation (i.e. -convergence) of the log
of per capita GRP for the period 1998 to
2008. The solid line graphs the movement
of -convergence, including all Kazakh re-
gions. The dashed line describes the -
convergence within the subset of regions,
which are well endowed with oil.4 Regions
without oil are represented by the third line.
Figure 3: Dispersion of the log of per capita GRP across Kazakh regions, 1998–2008
1998
year
.5
.6
.7
.8
2000 2002 2004 2006 2008
all regions regions with oil regions without oil
Source: own illustration based on UNDP 2009
This gives some interesting results. As the
variation in GRP is growing over time (except
in 2001 and 2007), no -convergence across
all Kazakh regions seems to be present. As
the trend for all regions coincides with the
one for the regions without oil, -convergence
could also not be established for these re-
gions.
In contrast, there is high evidence for -
convergence across the oil regions. The vari-
ation in per capita GRP in these regions
grows steeply during the ﬁrst two years, but
declines steadily in the following years. In
2007, it even falls below the starting level.
The reason for this might be that Atyrau and
Mangistau have traditionally been the main
oil producers whereas Aktyubinsk, Kyzylorda
and Western Kazakhstan are three relatively
new oil-producing regions, which were only
explored during the last decade (Najman et
al, 2005). That is why the latter caught up
with Atyrau and Mangistau between 2000 and
2007 while expanding the oil production grad-
ually.
4These are Aktyubinsk, Atyrau, Kyzylorda, Mangistau, and Western Kazakhstan.
Kurzanalysen 4
und InformationenCovergence across Kazakh Regions
4 -convergence
Generally speaking, the idea of convergence
is an outcome of the neoclassical growth the-
ory which is widely known from the Solow-
Model (1956). Two different concepts of -
convergence have to be distinguished, the
absolute and the conditional -convergence.5
Absolute or unconditional -convergence is
based on the idea that poor regions tend to
grow faster than rich ones and per capita
income of the former would catch up with
the latter. The main assumption here is that
the steady state levels of GDP (GRP) are
almost equal across the analyzed countries
(regions). This is most likely within a country,
as Barro and Sala-i-Martin (2004) stated.
Figure 4 shows the plot of the initial log
GRP per capita and its average log growth
rate between 1998 and 2008 for the regions
with and without oil. Looking at this, no clear
relationship can be identiﬁed for both groups
of regions.
Figure 4: GRP growth rate of regions with and without oil, 1998–2008
0
.0.5
.1
.15
7.5 8 8.5 9 9.5
GRP1998
regions with oil regions without oil
Source: own illustration based on UNDP 2009
The classical cross-sectional approach is
used to analyze absolute -convergence.
Therefore the following non-linear equation
based on Barro and Sala-i-Martin (2004) is
estimated using NLS.6
1
T
ln

yi;T
yi;0

= a 

(1   e T)=T

ln(yi;0)+ui;0;T
On the left hand side of the above equation
the average annual log growth rate of the per
5As the analysis of conditional convergence requires an even broader database, we only focus on absolute conver-
gence.
6To use OLS, a modiﬁed version of the equation should be used, where b (b =  
1
T
 
1   e
 T
) instead of  is
estimated.
5 Nr. 52
August 2011OSTEUROPA-INSTITUT REGENSBURG
capita GRP is displayed. Subscript t denotes
the year and subscript i the region. T stands
for the length of the observed time period. On
the right hand side y describes the level of
the initial GRP per capita. The error term ui;t
is distributed independently with mean 0 and
variance 2
i;t.
Roughly spoken, if the log of the initial
GRP per capita inﬂuences the average an-
nual growth rate negatively, convergence oc-
curs. Therefore , which can be interpreted
as the speed of convergence,7 should be
positive.
The results of our estimation are shown in
table 2. The  coefﬁcient has a negative sign
but is not statistically signiﬁcant. A negative 
would indicate diverging instead of converg-
ing regions. Nevertheless, the main result of
this analysis it that the unconditional conver-
gence approach is not the appropriate one in
case of the Kazakh regions.
Table 2: Results of non-linear estimation
(1)
VARIABLE Kazakhstan
 -0.013308
(0.0142531)
Observations 16
R2 0.051
standard error in parentheses
Source: own calculations based on UNDP 2009
5 Conclusion
In this paper we have shown that there is no
evidence for regional convergence in Kaza-
khstan, however, this is a preliminary result.
One reason for this might be that the assump-
tion of similar steady states does not hold for
the Kazakh regions. Another reason might
be the very limited number of observations.
To overcome this problem, data on a more
disaggregated level is necessary. Addition-
ally, data on other explanatory variables
which are proxies for the different steady
states could be included to look at the con-
ditional convergence across the Kazakh re-
gions.
References
[1] Agency of Statistics of the Rupublic of Kazakhstan, 2003. Statistical Yearbook of Kaza-
khstan. Almaty, 2003.
[2] Agency of Statistics of the Rupublic of Kazakhstan, 2007. Statistical Yearbook of Kaza-
khstan. Astana, 2007.
[3] Agrawal, Pradeep, 2008. “Economic Growth and Poverty Reduction: Evidence from
Kazakhstan”, Asian Development Review, vol. 24, no. 2, 90–115.
7According to the relevant convergence literature, the empirically estimated  is expected to be 2%.
Kurzanalysen 6
und InformationenCovergence across Kazakh Regions
[4] Barro, Robert J., and Sala-i-Martin, Xavier, 1992. “Convergence”, Journal of Political
Economy, 100(2):223–251.
[5] Barro, Robert J., and Sala-i-Martin, Xavier, 1995. Economic Growth. McGraw-Hill, New
York.
[6] Barro, Robert J., and Sala-i-Martin, Xavier, 2004. Economic Growth. The MIT Press,
Cambridge (Massachusetts).
[7] Najman, Boris et al, 2005. “How are Oil Revenues redistributed in an Oil Economy?”,
The University of Adelaide, School of Economics, Working Paper 2005–18.
[8] National Human Development Report, 2009. From exclusion to equality: realising the
rights of persons with disabilities in Kazakhstan. United Nations Development Pro-
gramme, Kazakhstan 2009.
[9] Solow, Robert M., 1956. “A Contribution to the Theory of Economic Growth”, Quarterly
Journal of Economics, Vol. 70, 65–94.
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Do Kazakh Regions Converge?

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