Convergence Across Regions in Kazakhstan

Abstract

This chapter analyzes unequal regional development in Kazakhstan. Applying the nonlinear least squares (NLS) method in presence of spatial correlation, we estimate the convergence rate of wages across Kazakh regions for the period 2003–2009. The estimated convergence rate is about 3.5 % which is somewhat higher than the estimates obtained for the USA and Europe implying that half of the gap between regions is reduced in about 20 years. We do not find any significant effect of resource abundance on growth. However, human capital is an important factor contributing to growth. Our estimates indicate that a 1 % increase in the share of students increases the growth rate by 0.18 % points.

JEL classification: O47, P25

Appendix

1.1 Wage Convergence

Given the production function $Y = A \cdot K^{\alpha }L^{1-\alpha }$, then the marginal product of labor becomes (1 −α)A ⋅ k ^α, where $k = K/L$. The log wage rate is thus: $\ln w =\ln (1-\alpha ) +\ln A +\alpha \ln k$. Assuming that the capital share, α, is constant over time, the growth rate of wages becomes $g_{w} = g_{A} +\alpha g_{k}$, where g _w is the growth rate of wages, g _A is the TFP growth rate, and g _k is the growth rate of capital-to-labor ratio. Given the diminishing marginal product of capital, the steady state exists where g _k  = 0.