Sustainable Development for Small Economy and Diversification from a Dominant Industry: Evidence from Macao

While the Macao gambling industry has developed prosperously, its rapid development raises a problem of economic dependence on gambling that restricts economic diversification and causes a sustainable issue of non-gambling industries. In recent years, regulating and controlling the appropriate scale of the gambling industry have been regarded as a solution for sustainable economic development. Consequently, it is quite important to give a quantitative scale to the future development of the gambling industry. This study aims to estimate the appropriate scale of the gambling industry under the expectation of the optimal development of moderate economic diversification in Macao. This study employs the method of Measuring Economic Diversification in Hawaii in 2011 to evaluate the levels of diversification of Macao’s economy. A Data Envelopment Analysis (DEA) efficiency calculated by a bootstrapping model is applied to obtain the operational efficiency of Macao’s gambling industry. A transition probability matrix in three scenarios is predicted by expert interviews and industry interviews. The appropriate scale of Macao’s gambling industry until 2021 is forecasted by Markov chain. The predicted result shows that the growth rate of gambling will not exceed 3% in terms of achieving the goal of optimal developing moderate economic diversification in Macao.