The principal-agent problem in labor markets arises because of the possibility of shirking by workers.

Question

Quizplus · Accepted Answer

The principal-agent problem in labor markets arises because the employer (principal) cannot perfectly monitor the actions of the employee (agent), leading to the possibility that the employee may shirk responsibilities or underperform, given the asymmetry of information between the two parties.

The Principal-Agent Problem in Labor Markets Arises Because of the Possibility