The insider-outsider theory implies that:
A) wages are flexible both upward and downward.
B) unemployment quickly reduces market wages.
C) agents pursue their own agendas,sometimes at the expense of principals.
D) wages may be inflexible downward.

Question

Quizplus · Accepted Answer

The insider-outsider theory suggests that those who are employed ("insiders") have more bargaining power and benefit from wage rigidity (inflexibility), whereas those who are unemployed ("outsiders") have less bargaining power and can lead to downward pressure on wages. Therefore, wages may be inflexible downward under this theory.

The Insider-Outsider Theory Implies That