Unformatted text preview: to the
mainland was near completed. Traded and Non-traded Products
Services are less tradable.
Outward expansion of manufacturing increases
income of H.K. people but not recorded in GDP.
Boost demand for consumption goods.
Prices of traded products determined by world
market (relatively cheap as exchange rate is linked).
Prices of non-traded products depend on the excess
demand over supply. Wage Inflation
Abolition of “reached-base” policy.
Rapid decline in fertility, rate of natural population
Ageing structure of the population reduces labour
Labour force participation rate is low.
Outflow of emigrants increases.
Unemployment rate is low.
Import of labour is constrained. Outsourcing & Adjustment
Outsourcing of less skill-intensive activities from the
metropolis to the hinterland allows the metropolis to
It is natural & beneficial for the metropolis as long as it
maintains a lead in skills over its hinterland (e.g.
London & NY).
However, specialization implies adjustment costs:
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- Spring '14