Minimum wages, tourism demand, and firm productivity: evidence from the accommodation industry

This study examines the effect of minimum wage policies on productivity in the tourism accommodation industry. Using firm-level panel data from Indonesia during 2017–2022, the analysis applies a fixed-effects framework that incorporates demand conditions to reflect the characteristics of the tourism industry. The results indicate that minimum wages are positively associated with both labor productivity and total factor productivity. The dynamic analysis suggests that productivity responses to wage increases emerge gradually over time, particularly for labor productivity. Tourism demand also exibits a strong and significant association with productivity, highlighting the importance of demand conditions in explaining firm productivity. No significant heterogeneity is observed across firm types, indicating that productivity effects of minimum wage increases are broadly similar across different hotel categories. This study contributes to the literature by integrating labor market policies with tourism demand dynamics from a developing country context.