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Collusion at the Non-Binding Minimum Wage: An Automatic Stabilizer?

Natalya Shelkova ()

No 2009-41, Working papers from University of Connecticut, Department of Economics

Abstract: This paper examines unemployment dynamics through the lens of a wage-posting model with two sectors and two types of workers. The model assumptions include collusion at a non-binding minimum wage, costly entry and intersectoral labor mobility. Model simulations demonstrate that collusion at a non-binding minimum wage induces entry into the low-wage sector. This dampens the overall negative employment impact of economic downturns. The excess of low-wage vacancies has shown not only to secure low unemployment rates for the low-skilled workers, but also to provide employment opportunities for the high-skilled when their industries substantially decline.

Keywords: unemployment; search; minimum wage; collusion (search for similar items in EconPapers)
JEL-codes: J30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-lab
Date: 2009-12
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Persistent link: http://EconPapers.repec.org/RePEc:uct:uconnp:2009-41

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