Economic Integration of Mainland China and the Hong Kong SAR

Since 1997, when the political sovereignty of Hong Kong reverted to China, the integration of the two economies has steadily increased. This article examines the economic and institutional differences between mainland China and Hong Kong, and considers the spillover benefits for the provinces adjacent to Hong Kong. The economic and productivity growth of mainland China and Hong Kong are decomposed into four attributes: input growth, adjusted scale effect, technical progress, and efficiency growth. A stochastic frontier model is used to estimate the growth attributes, and a human capital variable is incorporated in the production function. The empirical study compares the growth, productivity, and efficiency performance of mainland China and Hong Kong.