Minimum wage and the survival of hotel industry: Evidence from China

Abstract

The economic impacts of the minimum wage have been the focus of ongoing conflicting debates among poli­ cymakers and researchers. Taking a sample of 69694 firms established from 2011 and 2019 in the Chinese hotel sector, we analyzed the impact of minimum wage on firm survival and the moderating effect of the digital economy. Empirical evidences show that minimum wage has a positive impact on the survival risk of hotels, and the digital economy can negatively moderate the relationship between minimum wage and the survival risk of hotels. These findings are robust when tested with the hotel data of cross-provincial city pairs, other estimation models or longer observation periods. In addition, this study finds that the impact of the minimum wage and the moderating effect of the digital economy vary with hotel types. The rise of the minimum wage has brought greater operating pressure to formal hotel enterprises, and the digital economy has a greater inhibitory effect on the relationship between the rise of the minimum wage and the survival risk of hotel enterprises in informal hotel enterprises. The results indicate that informal hotels are less adversely affected by the increasing minimum wage and benefit more from the development of the digital economy.