Question: If employers are risk neutral and employees are risk averse

If employers are risk neutral and employees are risk averse, why is a salary contract optimal, ignoring tax and asymmetric information considerations? Under what conditions in employee compensation contracting are tax and risk sharing considerations in conflict? As a result of these conflicts, do employees bear more risk than if the goal were simply to allocate risks efficiently?

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  • CreatedAugust 06, 2015
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