Modeling Economic Growth in Contemporary Hong Kong

Using a sample of developed and developing nations (including China and Hong Kong), this study examines the financial market and housing wealth effects on consumption. Housing performs the dual functions as both a commodity providing a flow of housing services and an investment providing a flow of capital income. With an empirical framework based on the permanent income hypothesis, this study's findings suggest that a rise in housing price has both a positive wealth effect and a negative price effect on consumption. While the positive wealth effect is caused by an increase in capital income from housing investment, the negative price effect is caused by an increase in the cost of consuming housing services. Moreover, the sensitivity of consumption to unanticipated changes in housing price is related to the level of financial and institutional development.

If the only difference between cities lies in their initial housing prices, the initially lower-price cities should eventually catch up with the initially higher-price ones, i.e., “absolute convergence.” Alternatively, if the major determinants of housing prices are city-specific, cities will converge to parallel growth paths of housing prices, i.e., “conditional convergence.” This study tests for the existence of absolute and conditional convergence in house prices among cities in China. The strong evidence for conditional convergence suggests that each city possesses its own steady-state housing price to which it is converging, which depends on the city's own socio-economic characteristics. In other words, differences in these socio-economic characteristics among cities can create permanent differences in housing price among them. The differences in steady-states house price across cities reflect differences in the level of socio-economic development among them. The findings inform the kinds of interventions and resources that are most likely to be effective in reducing income disparity.

After the 2008 global financial crisis, the world has been through an improving economic integration. The scale of RMB cross-border transaction flows expands as well. Countries around China are gradually accepting the RMB as a means of trading and investing. Nowadays, the phenomenon of RMB substitutes the currencies of neighboring countries has become more and more widespread. As a frontier region for China's opening up to the outside world, Hong Kong's financial market is highly transparent with perfect infrastructures. The completion of the Hong Kong offshore RMB market leads to a rise of the RMB stock in Hong Kong, so there is a clear phenomenon of RMB substituting Hong Kong dollars (HKDs) in Hong Kong. This paper studies the substitution effect of RMB and HKD from both theoretical and empirical aspects, and puts forward policy recommendations based on the research results.

Sustainable economic growth is a major policy target of many governments over the world; Hong Kong also has no exception after its sovereignty handover on 1^st July 1997. Hong Kong has also been inertly receiving more than one hundred Chinese immigrants every day for several decades which mainly serves the purpose of family reunion through One-way Permit scheme. There exists a public voice in relation to Chinese immigrants' intentions of migrating to Hong Kong; some people argued Chinese immigrants are not simply aimed to reunifying their family but purposely grasping public resources of Hong Kong; public resources include public healthcare benefits and subsidized public housing; such hidden motivation and immigrants' economic contribution are not theoretically mutually exclusive. This chapter summarizes literature in relation to various concerns about immigrants' contribution towards economic growth, also consolidates immigrants' survey results which regularly conducted by Hong Kong Home Affairs Department and Immigration Department, and utilized Hong Kong census and by-census datasets to empirically compare the return rates of schooling and work experience between Chinese immigrants and natives over the past forty years, and investigate the causality between Hong Kong economic growth rates and these two return rates.

This chapter attempts to study the long-term determinants of public and private healthcare expenditure in Hong Kong, by employing time series data over the period from 1990 to 2017. We find that income is not a determinant of either public or private spending per capita on healthcare services. Rather, a higher proportion of elderly will raise public expenditure on health and private spending even more. The share of children within the population will conversely decrease both public and private spending. Results also show that the rising density of doctors decreases both public and private per capita healthcare spending, showing that the supplier-induced demand problem is not an issue in Hong Kong.