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Moral Hazard
Moral hazard is a type of principal-agent problem. Principal-agent problems arise when two entities, a principal and an agent, enter into a contract, but the principal in the contract does not have full information about the agent or about the agent’s actions.
This entry distinguishes between moral hazard— principal-agent problems involving hidden actions— and principal-agent problems involving hidden information. The entry discusses moral hazard in employment contracts and identifies a potential solution to the problem of moral hazard in employment contracts. Examples related to the economics of education are provided.
Moral Hazard and Principal-Agent Problems
Insurance contracts are often used as examples of principal-agent problems. When it is legal to do so, a company selling health insurance policies will usually charge a higher price to someone in poor ...
- Accountability and Education Policy
- Brown v. Board of Education
- Nation at Risk, A
- Access to Education
- Accountability, Standards-Based
- Accountability, Types of
- Accreditation
- Achievement Gap
- Adequate Yearly Progress
- American Association of School Administrators
- Association for Education Finance and Policy
- Capacity Building of Organizations
- Common Core State Standards
- Comprehensive School Reform
- Compulsory Schooling Laws
- Desegregation
- Educational Equity
- Elementary and Secondary Education Act
- Gainful Employment
- Individuals with Disabilities Education Act
- International Assessments
- International Organizations
- Investing in Innovation Fund (i3)
- Local Control
- Median Voter Model
- National Assessment of Educational Progress
- National Datasets in Education
- National Science Foundation
- No Child Left Behind Act
- Organisation for Economic Co-operation and Development
- Performance Evaluation Systems
- Philanthropic Foundations in Education
- Policy Analysis in Education
- Portfolio Districts
- Race to the Top
- SAT
- School Boards
- School Report Cards
- Special Education Finance
- State Education Agencies
- State Education Codes
- Teacher Autonomy
- Teacher Effectiveness
- Teacher Evaluation
- Teacher Performance Assessment
- Teachers’ Unions and Collective Bargaining
- Tracking in Education
- U.S. Department of Education
- Weighted Student Funding
- Budgeting and Accounting in Education Finance
- Adequacy: Successful School District Approach
- Administrative Spending
- American Association of School Administrators
- Auxiliary Services
- Block Grants
- Bonds in School Financing
- Budgeting Approaches
- Capital Budget
- Capital Financing for Education
- Categorical Grants
- Central Office, Role and Costs of
- Cost Accounting
- Cost of Education
- Cost-Benefit Analysis
- Cost-Effectiveness Analysis
- Enrollment Counts
- Fund Accounting
- Governmental Accounting Standards Board
- Higher Education Finance
- Intergovernmental Fiscal Relationships
- Philanthropic Foundations in Education
- Program Budgeting
- School District Budgets
- School District Cash Flow
- Service Consolidation
- Weighted Student Funding
- Education Markets, Choice, and Incentives
- Agency Theory
- Capitalist Economy
- Centralization Versus Decentralization
- Charter Management Organizations
- Charter Schools
- Compound Annual Growth Rate
- Comprehensive School Reform
- Deregulation
- Dual Labor Markets
- Economic Efficiency
- Education Management Organizations
- Education Production Functions and Productivity
- Educational Equity
- Educational Innovation
- Educational Vouchers
- Evolution in Authority Over U.S. Schools
- Factor Prices
- Globalization
- Homeschooling
- Local Control
- Lotteries in School Admissions
- Market Signaling
- Markets, Theory of
- Median Voter Model
- Moral Hazard
- Neighborhood Effects: Values of Housing and Schools
- New Institutional Economics
- Opportunity to Learn
- Parental Involvement
- Partial and General Equilibrium
- Pay for Performance
- Philanthropic Foundations in Education
- Portfolio Districts
- Principal-Agent Problem
- Private Contributions to Schools
- Private Fundraising in Postsecondary Education
- Private School Associations
- Privatization and Marketization
- Public Choice Economics
- Public Good
- Public-Private Partnerships in Education
- Risk Factors, Students
- Salary Schedule
- School-Based Management
- Schools, Private
- Schools, Religious
- Spillover Effects
- State Education Codes
- Student Incentives
- Student Mobility
- Theory of the Firm
- Equity and Adequacy in School Finance
- Brown v. Board of Education
- San Antonio Independent School District v. Rodriguez
- Serrano v. Priest
- Ability-to-Pay and Benefit Principles
- Access to Education
- Achievement Gap
- Adequacy
- Adequacy: Cost Function Approach
- Adequacy: Evidence-Based Approach
- Adequacy: Professional Judgment Approach
- Adequacy: Successful School District Approach
- Allocative Efficiency
- Association for Education Finance and Policy
- Bilingual Education
- Comparative Wage Index
- Desegregation
- District Power Equalizing
- District Size
- Due Process
- Education Finance
- Educational Equity
- Equalization Models
- Expenditures and Revenues, Current Trends of
- Guaranteed Tax Base
- Horizontal Equity
- Infrastructure Financing and Student Achievement
- Lotteries for School Funding
- Progressive Tax and Regressive Tax
- Property Taxes
- School District Wealth
- School Finance Equity Statistics
- School Finance Litigation
- Special Education Finance
- Title I
- Unfunded Mandates
- Vertical Equity
- Weighted Student Funding
- Financing of Higher Education
- Baumol’s Cost Disease
- Benefits of Higher Education
- College Choice
- College Completion
- College Dropout
- College Enrollment
- College Rankings
- College Savings Plan Mechanisms
- College Selectivity
- Community Colleges Finance
- Dual Enrollment
- Enrollment Management in Higher Education
- Faculty in American Higher Education
- Federal Perkins Loan Program
- Federal Work-Study Program
- For-Profit Higher Education
- Gainful Employment
- GI Bill
- Higher Education Finance
- Pell Grants
- Private Fundraising in Postsecondary Education
- Stafford Loans
- Student Financial Aid
- Student Loans
- Tuition and Fees, Higher Education
- Tuition Tax Credits
- University Endowments
- Key Concepts in the Economics of Education
- Age-Earnings Profile
- Agency Theory
- Baumol’s Cost Disease
- Behavioral Economics
- Capitalist Economy
- Centralization Versus Decentralization
- Cultural Capital
- Demand for Education
- Deregulation
- Discount Rate
- Economic Development and Education
- Economic Efficiency
- Economics of Education
- Economies of Scale
- Education Production Functions and Productivity
- Education Spending
- Educational Equity
- Educational Vouchers
- Elasticity
- External Social Benefits and Costs
- Factor Prices
- Foregone Earnings
- Human Capital
- Internal Rate of Return
- Market Signaling
- Markets, Theory of
- Moral Hazard
- New Institutional Economics
- Opportunity Costs
- Partial and General Equilibrium
- Permanent Income
- Policy Analysis in Education
- Price Discrimination
- Principal-Agent Problem
- Progressive Tax and Regressive Tax
- Public Choice Economics
- Public Good
- Public-Private Partnerships in Education
- Social Capital
- Socioeconomic Status and Education
- Spillover Effects
- Tax Burden
- Tax Elasticity
- Tax Incidence
- Tax Limits
- Tax Yield
- Technical Efficiency
- Theory of the Firm
- Tiebout Sorting
- Tracking in Education
- Tragedy of the Commons
- Transaction Cost Economics
- Vertical Equity
- Private and Social Returns to Human Capital Investments
- Access to Education
- Achievement Gap
- Adult Education
- Age-Earnings Profile
- Benefits of Higher Education
- Benefits of Primary and Secondary Education
- College Completion
- College Dropout
- College Enrollment
- College Rankings
- College Savings Plan Mechanisms
- College Selectivity
- Comparative Wage Index
- Continuing Education
- Credential Effect
- Demand for Education
- Discount Rate
- Dropout Rates
- Early Childhood Education
- Economic Development and Education
- Education and Civic Engagement
- Education and Crime
- Education Spending
- Federal Work-Study Program
- Financial Literacy and Cognitive Skills
- Foregone Earnings
- Gainful Employment
- General Educational Development (GED®)
- GI Bill
- Human Capital
- Income Inequality and Educational Inequality
- Internal Rate of Return
- Job Training
- Labor Market Rate of Return to Education in Developing Countries
- Market Signaling
- Nonwage Benefits
- Present Value of Earnings
- Race Earnings Differentials
- Risk Factors, Students
- School Quality and Earnings
- Service Consolidation
- Spillover Effects
- Student Mobility
- Vocational Education
- Production and Costs of Schooling
- Ability-to-Pay and Benefit Principles
- Adequacy
- Adequacy: Cost Function Approach
- Adequacy: Evidence-Based Approach
- Adequacy: Professional Judgment Approach
- Adequacy: Successful School District Approach
- Administrative Spending
- Adult Education
- Allocative Efficiency
- Baumol’s Cost Disease
- Capacity Building of Organizations
- Capitalist Economy
- Central Office, Role and Costs of
- Compound Annual Growth Rate
- Contracting for Services
- Cost Accounting
- Cost of Education
- Cost-Benefit Analysis
- Cost-Effectiveness Analysis
- Data Envelopment Analysis
- Department of Defense Schools
- Digital Divide
- Distance Learning
- District Size
- Dual Enrollment
- Economic Cost
- Economies of Scale
- Education Production Functions and Productivity
- Education Technology
- Educational Innovation
- Elasticity
- Enrollment Counts
- Evolution in Authority Over U.S. Schools
- Extended Day
- External Social Benefits and Costs
- Hedonic Wage Models
- Homeschooling
- Infrastructure Financing and Student Achievement
- Intergovernmental Fiscal Relationships
- Online Learning
- Peer Effects
- Price Discrimination
- Professional Development
- School Boards
- School District Budgets
- School Size
- Social Capital
- Socioeconomic Status and Education
- Supplemental Educational Services
- Teacher Compensation
- Teacher Experience
- Technical Efficiency
- Revenue and Aid for Schools
- Bilingual Education
- Block Grants
- Bonds in School Financing
- Capital Financing for Education
- Categorical Grants
- Early Childhood Education
- Education Finance
- Enrollment Counts
- Equalization Models
- Fiscal Environment
- Fiscal Neutrality
- General Obligation Bonds
- Guaranteed Tax Base
- Individuals with Disabilities Education Act
- Infrastructure Financing and Student Achievement
- Lotteries for School Funding
- Parcel Tax
- Private Contributions to Schools
- Progressive Tax and Regressive Tax
- Property Taxes
- Pupil Weights
- School District Cash Flow
- School District Wealth
- Special Education Finance
- State Education Agencies
- Tax Burden
- Tax Elasticity
- Tax Incidence
- Tax Limits
- Tax Yield
- Title I
- Tuition and Fees, K-12 Private Schools
- Tuition Tax Credits
- Unfunded Mandates
- Statistical Methods in the Economics of Education
- Data Envelopment Analysis
- Difference-in-Differences
- Econometric Methods for Research in Education
- Economic Cost
- Effect Size
- Family Educational Rights and Privacy Act
- Fiscal Disparity
- Fixed-Effects Models
- Instrumental Variables
- International Datasets in Education
- Measurement Error
- Median Voter Model
- National Center for Education Statistics
- National Datasets in Education
- Omitted Variable Bias
- Ordinary Least Squares
- Organisation for Economic Co-operation and Development
- Peer Effects
- Present Value of Earnings
- Propensity Score Matching
- Pupil Weights
- Quantile Regression
- Quasi-Experimental Methods
- Randomized Control Trials
- Regression-Discontinuity Design
- Reliability
- Selection Bias
- Tiebout Sorting
- Validity
- Teachers and Teacher Labor Markets
- Comparative Wage Index
- Dual Labor Markets
- Faculty in American Higher Education
- Hedonic Wage Models
- Licensure and Certification
- National Board Certification for Teachers
- Nonwage Benefits
- Pay for Performance
- Performance Evaluation Systems
- Private Fundraising in Postsecondary Education
- Professional Development
- Reduction in Force
- Salary Schedule
- School Boards, School Districts, and Collective Bargaining
- Teacher Autonomy
- Teacher Compensation
- Teacher Effectiveness
- Teacher Evaluation
- Teacher Experience
- Teacher Intelligence
- Teacher Pensions
- Teacher Performance Assessment
- Teacher Supply
- Teacher Training and Preparation
- Teacher Value-Added Measures
- Teachers’ Unions and Collective Bargaining
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