Understanding wage differences across tourism-characteristic sectors: Insights from an extended input-output analysis

Despite substantial evidence suggesting that final demand is closely related to wages in the tourism industry, little is known about how final demand affects tourism wages. To this end, this study combines input–output analysis and structural decomposition analysis techniques to develop an analytical framework that examines how final demand affects wage changes in tourism-characteristic sectors through industrial linkage mechanisms. The empirical results from China show that the differential contributions of final demand, industrial linkages, and the share of labour returns to sectoral wage changes are the key factors explaining the differences in wage growth across tourism-characteristic sectors in China from 2002 to 2017. For most tourism-characteristic sectors in China, increased consumption and reduced share of labour returns are the main contributors to wage premiums and discounts, but the magnitude of their effects varies across sectors. The production structure effect and import substitution effect present more pronounced sectoral differences in terms of the direction of their effects.