The notion that workers are more inclined to shun risk and accept stable wages with layoffs based on seniority is an important element in
A) the theory of deferred payments.
B) new classical macroeconomic theory.
C) profit-sharing plans.
D) the "efficient insider" hypothesis.
E) implicit contract theory.

Question

Quizplus · Accepted Answer

The idea that workers prefer stable wages with layoffs based on seniority is one of the key concepts in implicit contract theory. This theory suggests that there is a sort of unwritten agreement between employers and employees, in which the latter are willing to accept lower wages in exchange for job security and protection against layoffs. This concept is often used to explain the behavior of workers in various industries, as well as to evaluate the effectiveness of different incentive schemes, such as profit sharing or deferred payments. Choice A (the theory of deferred payments) is a related concept, but it is not directly tied to the idea of worker preferences for stable wages. Choice B (new classical macroeconomic theory) is a broader theory that focuses on the role of expectations in shaping economic behavior, and it does not specifically address the preferences of workers. Choice C (profit-sharing plans) is also related, but it is only one of several possible incentive schemes that employers may use to motivate workers. Finally, choice D (the "efficient insider" hypothesis) is a theory from finance that discusses the behavior of shareholders in firms, and it is not directly relevant to the behavior of workers.

The Notion That Workers Are More Inclined to Shun Risk