Savings-Based Incentive Traps in Public Budgeting: Evidence from Kazakhstan and Policy Lessons from Eastern Europe

Murat Abuov, Raushan Dulambayeva and Serik Jumabayev

Economic Studies journal, 2026, issue 5, 3-22

Abstract: This study analyses how savings-based bonus rules shape budgetary behaviour in public institutions using a mechanism-based institutional framework. Rather than estimating causal effects or evaluating policy impacts, the analysis identifies the incentive structure embedded in budgetary regulations and the behavioural adaptations it generates. The methodology combines institutional rule analysis with an indicator-based structural model that captures the key channels through which savings are generated and transformed into bonuses, including the retention of vacant positions, under-execution of procurement plans, compression of flexible expenditures, and the concentration of payments at the end of the fiscal year. The internal coherence of the mechanism is examined using a structural consistency model applied to synthetic data calibrated within institutionally plausible ranges. The findings suggest that these channels form a stable and internally coherent incentive system in which budgetary savings can be converted into discretionary bonuses within the existing regulatory framework. A comparison with Eastern European practices situates these findings within alternative approaches to incentive system design, demonstrating that pre-planned and normatively constrained bonus schemes are institutionally separated from mechanisms based on expenditure under-execution. The study contributes to the discussion on budgetary reforms by identifying institutional incentives and organisational constraints, and provides practical recommendations for policymakers and public managers seeking to enhance the efficiency of public financial management. The developed model, while holding behavioural assumptions and institutional parameters constant, generates an estimated annual savings of approximately USD 289.3 million under a fixed quarterly bonus configuration.

JEL-codes: D73 H61 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:bas:econst:y:2026:i:5:p:3-22

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