FISCAL DECENTRALIZATION, PUBLIC INVESTMENT, AND REGIONAL INCOME CONVERGENCE: EVIDENCE FROM UZBEKISTAN

This paper examines whether fiscal decentralization and public investment contribute to regional income convergence in Uzbekistan between 2019 and 2025. Using a balanced panel dataset covering 14 administrative regions, we estimate Fixed Effects and β-convergence models to assess the effects of capital expenditure, social transfers, fiscal retention mechanisms, and employment growth on household income dynamics. Results indicate that capital expenditure demonstrates strong positive elasticity with respect to income growth and supports conditional convergence across regions. Social transfers significantly reduce poverty but display weaker long-term growth effects. Regions retaining higher shares of locally generated revenues experience stronger employment expansion and accelerated income growth, suggesting that fiscal autonomy enhances development outcomes. The findings contribute to regional development and fiscal federalism literature by providing empirical evidence from a post-transition Central Asian economy undergoing institutional reform. Policy implications emphasize performance-based intergovernmental transfers and investment-oriented decentralization mechanisms to reduce spatial inequality.