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Abstract

This paper investigates a central puzzle in development economics: why sustained GDP growth does not always coincide with productivity-enhancing structural change. Focusing on two major Central Asian economies—Kazakhstan and Uzbekistan—over 2000–2024, we document that both countries experienced steady increases in output per worker, yet followed markedly different structural transformation paths.

To explain this divergence, we combine aggregate growth accounting, sectoral productivity decomposition, and a shift-share structural change framework across agriculture, industry, and services. Using World Bank World Development Indicators, we decompose output growth into contributions from capital, labor, and total factor productivity (TFP), and then isolate the roles of within-sector productivity growth and labor reallocation (static and dynamic effects).

Our empirical strategy allows us to test whether aggregate growth is driven by productivity improvements within sectors or by the movement of labor toward more productive activities. We show that Kazakhstan’s growth was largely TFP-driven—particularly in the early 2000s—consistent with a commodity-led expansion, but accompanied by weak or negative dynamic reallocation. In contrast, Uzbekistan’s growth was more accumulation-led, with stronger contributions from capital deepening and employment growth, and only post-2012 evidence of positive dynamic structural change.

The results demonstrate that high growth alone is neither sufficient nor necessary for productivity-enhancing structural transformation. We contribute to the literature by showing that the composition of growth—rather than its rate—determines whether structural change supports or undermines long-run productivity gains. These findings have important implications for resource-rich and transition economies seeking to translate growth into sustainable development.