Collusion at the Non-Binding Minimum Wage: An Automatic Stabilizer?
AbstractThis 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.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2009-41.
Length: 40 pages
Date of creation: Dec 2009
Date of revision:
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More information through EDIRC
unemployment; search; minimum wage; collusion;
Find related papers by JEL classification:
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-10 (All new papers)
- NEP-DGE-2010-01-10 (Dynamic General Equilibrium)
- NEP-LAB-2010-01-10 (Labour Economics)
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