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The myth of a booming town: A two-sector model of Macau economic growth
Xinhua Gu1; Li Sheng2
Source PublicationChina Economic Journal
ABS Journal Level1
Other Abstract

This paper builds a trade-based equilibrium, two-sector model to reveal the inefficiency of a foreign-dominated, gaming-biased, bubble growth in Macau. This fast GDP growth that has not led to much real development as measured by the effective GNP would likely have adverse impacts on the city's long-term prosperity. We employ the model to analyze why various gaming markets have adopted differing tax rates. This work provides a rigorous argument against the problematic attempts to push for low tax convergence in the Asian gaming market. To neutralize the damaging effects of foreign domination in the local economy, we offer several policy recommendations for reviving home businesses and enhancing domestic welfare in Macau. It is suggested that enforceable laws should be made to prevent the foreign firms with cross-market operations from stealing away Macau customers, that differential taxes on casino operators and income taxes on player winnings should be chosen to support Chinese-owned casinos and curb pathological gambling, and that a sovereign wealth fund should be established to stop too much of Chinese gaming money from being lost too fast and foster Macau's economic autonomy by reducing its overreliance on foreign concerns for output growth.

KeywordGrowth Development Casino Gambling Tax Efficiency Gaming Laws
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Document TypeJournal article
CollectionFaculty of Business Administration
Corresponding AuthorXinhua Gu
Affiliation1.Faculty of Business Administration, University of Macau, Macau
2.Institute for Tourism Studies, Colina de Mong Há, Macao
First Author AffilicationFaculty of Business Administration
Corresponding Author AffilicationFaculty of Business Administration
Recommended Citation
GB/T 7714
Xinhua Gu,Li Sheng. The myth of a booming town: A two-sector model of Macau economic growth[J]. China Economic Journal,2009,2(2):187-202.
APA Xinhua Gu,&Li Sheng.(2009).The myth of a booming town: A two-sector model of Macau economic growth.China Economic Journal,2(2),187-202.
MLA Xinhua Gu,et al."The myth of a booming town: A two-sector model of Macau economic growth".China Economic Journal 2.2(2009):187-202.
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