Economic Letters

30 September 2020

• Trends in labour's share of income in Hong Kong: A shift-share analysis based on sectoral data (PDF)
  Cheuk Wai Chow and Kelvin Wong
  This article uses shift-share analysis to decompose the long-term movements of labour's share of income in Hong Kong over nearly four decades on a sectoral basis. The analysis reveals two underlying factors behind the overall trend. One is a positive "within industry" effect, which was more pronounced from the 1980s to the 2000s, mainly due to rising labour income share within the tertiary industry. Another is a negative "compositional change" effect, which reflects economic restructuring from the secondary industry to the tertiary industry. While these two effects almost offset each other most of the time, the positive "within industry" effect dominated the negative "compositional change effect" from the 1990s to the 2000s, leading to a relatively visible increase in the overall labour income share over this interval.

17 September 2020

• Long-term changes in the overall labour force participation rate since the mid-1990s: the effects of ageing and education upgrading (PDF)
  Raymond Tsang
  The compositional effect of demographic changes is one of the factors contributing to long-term changes in Hong Kong’s overall labour force participation rate (LFPR). This article utilises a shift-share analysis to quantify how compositional changes in the age and education of the population could affect the overall LFPR over 1995-2019. The results suggest that population ageing put considerable downward pressure on the overall LFPR over 1995-2019, which more than offset the uplift brought about by education upgrading in the population. Such downward pressure has become more noticeable as the trend of population ageing has accelerated in recent years.

28 August 2020

• Impact of foreign participation in emerging markets’ local currency sovereign bond markets (PDF)
  Gary Yau
  Motivated by the inclusion of Chinese government bonds in major global bond indices starting in 2019, this article looks to provide an updated analysis on the impact of foreign participation in emerging markets’ local currency sovereign bond markets. With a focus on the post-global financial crisis period, a panel analysis shows that higher foreign participation tends to lower long-term sovereign bond yields. The results are largely in line with earlier studies.

6 August 2020

• Business performance and operating situation of low-paying sectors in 2018 (PDF)
  Frank Lee
  Based on the 2018 Annual Survey of Economic Activities conducted by the Census and Statistics Department, this letter article analyses the business performance and operating situation of low-paying sectors (in which relatively more low-paid employees are employed) and the small and medium-sized enterprises therein. The data show that the overall profitability of low-paying sectors remained weaker than in other sectors in 2018, and the overall profitability of small and medium-sized enterprises in the low-paying sectors was weaker than that of enterprises of all sizes in low-paying sectors. The overall profit ratio of small and medium-sized enterprises in some low-paying sectors (e.g. retail, and food and beverage services) was particularly low.

28 July 2020

• Income differences of post-secondary degree graduates by field of study across different generations (PDF)
  Kelvin Wong
  This article analyses the employment income of young degree graduates by field of study across generations based on population census and by-census data from 1991 to 2016. The results indicate that (i) by field of study, the median starting income and subsequent incomes of degree graduates in more recent generations (from 2006 onward), after discounting for inflation, were generally less favourable than those of cohorts from the 1990s, consistent with the analysis results based on the income performance of all degree graduates; and (ii) the median incomes of graduates from some popular subjects (such as medical and related studies, law) continued to perform better than other graduates. The former could be partly related to the more notable increase in the supply, relative to demand, of young higher-educated persons in the labour market over the past two decades or so. The latter was partly related to the larger proportion of graduates from these specialised fields engaged in higher-skilled occupations.

30 June 2020

• Possible economic losses caused by the local social incidents – An update (PDF)
  Desmond Hou and Victor Leung
  The local social incidents involving violent acts in the second half of 2019 caused significant disruptions to inbound tourism and consumption-related economic activities. Based on empirical data, this article crudely estimates the possible economic losses arising from the additional decline in businesses of the retail, restaurant and accommodation sectors, as well as that in other tourists' consumption expenditure due to the incidents. Our crude estimates suggest that these economic losses dragged the year-on-year change in real GDP by more than 2.5 percentage points in the second half of 2019, and were the main reason for the economic recession.

26 June 2020

• An overview of outward direct investment from the Mainland (PDF)
  Philip Tzang
  The Mainland has emerged as one of the major sources of foreign direct investment amid the progression of the Going Global Strategy. Using the Mainland's official statistics of outward direct investment, this article demonstrates that the Mainland's outward direct investment has spanned across various sectors and geographical regions. The diversified pattern of investment is closely linked to the development needs of the Mainland economy. The article also briefly discusses the recent trend of the Mainland's outward direct investment and its future prospects.

22 May 2020

• Income differences of post-secondary degree graduates across different generations (PDF)
  Kelvin Wong
  This article analyses the employment income of young degree graduates across generations based on population census and by-census data from 1991 to 2016. The results indicate that the median starting income and subsequent incomes of degree graduates in more recent generations (from 2006 onward), having discounted for inflation, were generally less favourable than those of cohorts from the 1990s. This could be partly related to the more notable increase in the supply, relative to demand, of young higher-educated persons in the labour market over the past two decades or so. Notwithstanding this, in general, the employment income of post-secondary degree holders consistently outperformed their lower-educated counterparts across all generations, likely due to a larger proportion of them taking up higher-skilled occupations.

21 February 2020

• Can newspapers be used to measure external economic uncertainties? (PDF)
  Benny Lui and David Chan
  This article constructs a quick and intuitive indicator on external economic uncertainties embodied in newspapers from a wide range of international sources. The indicator provides a relatively cost-effective way to gauge and track economic uncertainties or sentiment alongside the existing survey-based indicators, and proxies the changes in economic performance of Hong Kong, a small and open economy under substantial influence by external factors, rather well.

21 February 2020

• Relationship between sectoral employment and selected GDP components (PDF)
  Jonas Ng
  Different sectors adjust their employment differently to changing economic conditions. This note quantifies the relationship between employment of major sectors and selected GDP components that represent developments in domestic and external markets. The long-run multipliers largely confirm the notion that employment in more externally-oriented sectors reacts to a greater extent to changes in external demand, and employment in more domestically-oriented sectors reacts more strongly to changes in spending in the domestic market.

29 January 2020

• Possible economic losses caused by the recent social incidents (PDF)
  Desmond Hou and Victor Leung
  The local social incidents involving violent acts in the past few months have caused significant disruptions to inbound tourism and consumption-related economic activities. Based on objective data, this article crudely estimates the possible economic losses arising from the additional decline in businesses of the retail, restaurant and accommodation sectors, as well as that in other tourists' consumption expenditure due to the incidents. Our crude estimates suggest that, of the 2.9% year-on-year economic contraction in the third quarter of 2019, around 2 percentage points were conceivably attributable to the impacts on these sectors.

24 January 2020

• Four selected measures of the corporate tax burden in Hong Kong and other advanced economies (PDF)
  Ben Choi
  Four measures of the corporate tax burden are briefly reviewed in this letter to discuss Hong Kong's corporate tax competitiveness relative to other advanced economies. Although advanced economies enacted a number of corporate tax reforms to cut their corporate tax rates in recent years, all these measures show that the corporate tax burden in Hong Kong remains low when compared to other advanced economies.

13 January 2020

• An introduction to the gig economy (PDF)
  Raymond Tsang
  In light of the growing popularity of digital platforms which have attracted a number of workers in recent years, the term “gig economy” has caught much attention around the world, including in Hong Kong. However, the concept of the gig economy is not well-defined and involves diverse types of working. This article introduces the concept of the gig economy and its participants.