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

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. The numerical simulations

demonstrate that a collusive minimum wage by inducing entry into the low-wage sector may

reduce unemployment during economic downturns.