Adverse selection is more likely when a job requires intangible or unmeasurable abilities.

Question

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Adverse selection refers to the phenomenon where one party has more information than the other party in a transaction. When a job requires intangible or unmeasurable abilities, it is harder for the employer to determine the true value of the candidate, and thus the candidates with better qualities may choose not to apply or accept the job, leaving the employer with a pool of less qualified candidates. This increases the likelihood of adverse selection.

Adverse Selection Is More Likely When a Job Requires Intangible