*6.2. Theoretical Contributions*

The results of this study make the following three theoretical contributions. First, according to the Chicago School of Industrial Economics Theory, the larger the scale of an industry, the higher its efficiency and innovation ability [50] but the sustainable development theory puts limits the growth. Macao is a small economy. The gambling industry dominates more than half of the whole economy. It has negative externalities, so it is easily affected by the external environment and has a siphon effect on other industries. Therefore, the continuous expansion of the gambling industry is unsustainable for the industry itself and the overall economy and society. Macao and some other international cities that position gambling and tourism as a pillar industry has always advocated for moderate diversification of the industry. Therefore, this study discusses how to assess the achievement of a moderately diverse economy in a small economy and how to obtain quantitative and appropriate scales to achieve economically sustainable development in the small economy.

Second, this study confirms that the scale of the current gambling industry in Macao is in line with the theory of congestion of production factors, which states that overdevelopment of a dominant industry will reduce its own efficiency and harm the development of other industries [51]. In recent years, the scale of the gambling industry has expanded and its efficiency has declined. This study shows that controlling the gambling industry in an appropriate scale can improve its efficiency. This study also shows that a stable transition from gambling industry to non-gambling industry can achieve a moderate economic diversification.

Finally, Macao needs to have sustainably economic diversification including the sustainable development of the gambling industry. Economic diversification aims to speed up the growth of economic outputs from a range of industries. It leads to a consequence of long-term economic growth which provides economic well-being in much longer-term through the notion of economic sustainability. For having economic sustainability, economic diversification is not just the economic development of certain industries. It involves technical and institutional arrangements by which output is produced and distributed [52]. Thus, we need to determine how to influence the other industries under the premise of sustainable development of the gambling industry. To develop a robust and stable economy, Macao's gambling industry should appropriately adjust its scale and diversify as much as possible to adjust to the development status that is most suitable to achieve sustainable development and the continued development of other industries. This study contributes to sustainability study a model that can be used to reveal the optimal level of development of gaming industry in order to create conditions for economic diversification in Macao. This model can also be used to calculate the appropriate scale for one industry to optimally develop economic diversification in other cities.
