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Employment contracts and stress: Experimental evidence

Author

Listed:
  • Allan, Julia L.
  • Andelic, Nicole
  • Bender, Keith A.
  • Powell, Daniel
  • Stoffel, Sandro
  • Theodossiou, Ioannis

Abstract

A growing literature has found a link between performance-related pay (PRP) and poor health, but the causal direction of the relationship is not known. To address this gap, the current paper utilises a crossover experimental design to randomly allocate subjects into a work task paid either by performance or a fixed payment. Stress is measured through self-reporting and salivary cortisol. The study finds that PRP subjects had significantly higher cortisol levels and self-rated stress than those receiving fixed pay, ceteris paribus. By circumventing issues of self-report and self-selection, these results provide novel evidence for the detrimental effect PRP may have on health.

Suggested Citation

  • Allan, Julia L. & Andelic, Nicole & Bender, Keith A. & Powell, Daniel & Stoffel, Sandro & Theodossiou, Ioannis, 2021. "Employment contracts and stress: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 360-373.
    • Handle: RePEc:eee:jeborg:v:187:y:2021:i:c:p:360-373
    DOI: 10.1016/j.jebo.2021.04.015
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    Cited by:

    1. Benjamin Artz & John S Heywood, 2024. "Performance pay and work hours: US survey evidence," Oxford Economic Papers, Oxford University Press, vol. 76(3), pages 609-627.
    2. Thomas Dohmen & Ingrid M. T. Rohde & Tom Stolp, 2023. "Tournament incentives affect perceived stress and hormonal stress responses," Experimental Economics, Springer;Economic Science Association, vol. 26(4), pages 955-985, September.
    3. Jirjahn, Uwe & Rienzo, Cinzia, 2024. "Working from Home and Performance Pay: Individual or Collective Payment Schemes?," IZA Discussion Papers 17234, Institute of Labor Economics (IZA).
    4. Baktash, Mehrzad B. & Heywood, John S. & Jirjahn, Uwe, 2023. "Does Performance Pay Increase the Risk of Marital Instability?," GLO Discussion Paper Series 1305, Global Labor Organization (GLO).
    5. Nicole Andelic & Julia Allan & Keith A. Bender & Daniel Powell & Ioannis Theodossiou, 2024. "Performance‐related pay, mental and physiological health," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 63(1), pages 3-25, January.
    6. Baktash, Mehrzad B. & Heywood, John S. & Jirjahn, Uwe, 2022. "Worker stress and performance pay: German survey evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 201(C), pages 276-291.
    7. Green, Colin P. & Heywood, John S., 2022. "Does Performance Pay Influence Hours of Work?," IZA Discussion Papers 15474, Institute of Labor Economics (IZA).
    8. Adams, Scott J. & Heywood, John S. & Ullman, Darin F. & Venkatesh, Shrathinth, 2022. "Social jobs and the returns to drinking," Economics & Human Biology, Elsevier, vol. 46(C).
    9. Marco Clemens, 2024. "Bonuses, Profit-sharing and Job Satisfaction: the More, the Better?," IAAEU Discussion Papers 202406, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    10. Baktash, Mehrzad B., 2024. "Does Performance Pay Increase the Risk of Worker Loneliness?," GLO Discussion Paper Series 1524, Global Labor Organization (GLO).
    11. Green, Colin P. & Heywood, John S., 2023. "Performance pay, work hours and employee health in the UK," Labour Economics, Elsevier, vol. 84(C).

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    More about this item

    Keywords

    Performance-related pay; Stress; Experiment; Cortisol;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • I0 - Health, Education, and Welfare - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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