Determinants of Public Procurement Activity in Kazakhstan: Evidence from Regional Panel

Public procurement is an important tool for providing public services and regional development, but its effectiveness varies significantly between regions, especially in Kazakhstan. The purpose of this study is to assess the impact of fiscal dependence and socio-economic conditions on the level of disruption of public procurement and intensity of procurement activities in Kazakhstan using a panel econometric approach with two-way fixed effects models, which allows taking into account unchangeable regional characteristics and general economic shocks. The empirical base of the study consists of a unique panel dataset on 458 districts and 17 cities of Kazakhstan covering 2016-2024 and includes 432,438 contracts worth 2.65 trillion tenge in total. The results show that, on average, 3.14% of contracts are declared invalid, corresponding to 0.87% of total purchase price.. The most stable factor disrupting purchases is inflation. An increase in the CPI by 1 point leads to an increase in failed contracts by 0.3-0.4 percentage points (p<0.01). Dependence on inter-budget transfers has a weak and unstable impact. Purchasing activity is significantly related to the labour market situation. Rising unemployment reduces both the number and value of contracts. Higher wages contribute to increasing their number. Inflation is a key constraint on public procurement effectiveness. In the future, research can be expanded by using more detailed regional socio-economic data and by disaggregating procurement by type of procedure and sector.

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