Asked by Tyler Schmitt on May 10, 2024
Verified
The principal-agent problem in labor markets arises because of the possibility of shirking by workers.
Principal-agent Problem
A dilemma in which one party (the agent) is expected to act in the best interest of another party (the principal) but may have the incentive to act in their own interest instead.
Shirking
The behavior of avoiding or evading work responsibilities, often in employment settings.
- Identify the principal-agent problem and its effects in labor markets.
Verified Answer
AM
Alyssa MartinezMay 12, 2024
Final Answer :
True
Explanation :
The principal-agent problem in labor markets refers to the challenges that arise from an employer's inability to monitor and control a worker's effort and actions effectively. One of the main issues is the incentive for workers to shirk or not put in their full effort, which can lead to lower productivity and lower profits for the employer.
Learning Objectives
- Identify the principal-agent problem and its effects in labor markets.
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