Worker Stress and Performance Pay: German Survey Evidence

Arbeitspapier

While performance pay can benefit firms and workers by increasing productivity and wages, it has also been associated with a deterioration of worker health. The transmission mechanisms for this deterioration remain in doubt. We examine the hypothesis that increased stress is one transmission mechanism. Using unique survey data from the German Socio-Economic Panel, we find performance pay consistently and importantly associates with greater stress even controlling for a long list of economic, social and personality characteristics. It also holds in instrumental variable estimations accounting for the potential endogeneity of performance pay. Moreover, we show that risk tolerance moderates the relationship between performance pay and stress. The risk tolerant receiving performance pay suffer less stress than the risk averse.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 14939

Classification and Topics

• Classification: Wirtschaft ; Compensation Packages; Payment Methods ; General Welfare; Well-Being ; Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
• Subject: performance pay ; worker health ; stress ; risk tolerance

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Baktash, Mehrzad B. ; Heywood, John S. ; Jirjahn, Uwe
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/250600
• Last update: 10.03.2025, 11:42 AM CET