Intersectoral Linkages in Booming Sector Economies

There is a general perception that the Gaming sector has contributed to the overall growth of Macao through the trickle-down effect, passing on the benefits of growth to other sectors. After the liberalization of the gaming industry in 2002, this booming sector experienced several years of exponential growth, becoming the driving industry for Macao’s economy. Several scholars and researchers have dedicated their studies to the effects of the casino gaming industry as a booming sector in such a small economy. Most of these studies aimed to quantify economic growth indicators’ evolution and point out the possible problems related to the sustainability of an economy dependent on just one pillar sector. However, there is a gap in what concerns the measurement of the influence of the Gaming sector as a driving industry for the several other sectors or following industries of Macao’s economy. The purpose of this research study is to investigate in what measure the Gaming sector in Macao leveraged the other economic sectors and how related or correlated are the some of the industries of Macao’s Economy.
The research adopted statistical tests such as Granger causality test and Vector Autoregressive (VAR) technique based upon the Impulse Response Function (IRF) and Variance Decomposition (VD) to observe linkages among variables. The empirical results show a significant causal linkage from Gaming to the other sectors of Macao’s economy. Our findings are consistent with respect to the statistical tests used. Overall, the results indicate a forward linkage between Gaming and the other sectors.