Fiscal and Structural Drivers of Regional Investments Divergence: Evidence from Kazakhstan and European Benchmark Economies

This study investigates whether the interaction between structural characteristics and fiscal mechanisms determines regional investment allocation and contributes to regional divergence in Kazakhstan. To achieve this aim, panel regression with interaction effects and cross-country benchmarking are employed for 2005–2025, and the influence of structural characteristics and fiscal mechanisms on the efficiency and spatial distribution of investment is assessed. The methodology combines panel regression with interaction effects and comparative cross-country analysis. The model includes fiscal variables (budgets, subsidies), structural indicators (industrial shares, business density), and interactions (industry x budget, agriculture x budget). Additionally, benchmarking is conducted with European countries, including Estonia, Latvia, Lithuania, Poland, Romania, and Norway, using log-difference and coefficient variation. The results show that investment allocation is associated with divergence rather than convergence. The negative effects of subsidies and industrial concentration indicate the limitations of redistributive and sectoral factors. At the same time, positive interaction effects confirm that investment is effective when fiscal structural conditions are aligned. Business density acts as a sustainable driver of growth. A cross-country analysis demonstrates that countries with a more balanced structure and institutional environment achieve greater resilience and less differentiation. The results highlight the nonlinear and structurally determined nature of investment. They point to the need for policies focused on diversification, entrepreneurship development, and the alignment of fiscal instruments with regional economies.