Impact of CEPA on the labor market of Hong Kong

A panel data method is used to evaluate the impact of the Closer Economic Partnership Agreement (CEPA) signed between Mainland China and Hong Kong. Using the time series data of Hong Kong, Austria, Denmark, Finland, France, Germany, Italy, Japan, Korea, Netherlands, Norway, Singapore, Taiwan, U.K., and U.S. to construct what would have happened to Hong Kong's unemployment rate had there been no CEPA, we find that the CEPA effects gradually increases over time and eventually reached a constant level of reducing Hong Kong's unemployment rate by 9% a year.

► We use panel data to evaluate the impact of Closer Economic Partnership Agreement (CEPA) on the labor market. ► Used 14 countries' unemployment rates to make counterfactual - a time series path as if CEPA had not signed between China and Hong Kong. ► We adopt AICC to select the countries to form the counterfactual. ► We find that CEPA has created a positive effect on the labor market. ► The unemployment rate of Hong Kong is estimated to be reduced by 9%.