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Stress, effort, and incentives at work

Author

Listed:
  • Elena Cottini
  • Paolo Ghinetti
  • Elisabetta Iossa
  • Pierluigi Sacco

Abstract

An extensive medical and occupational-health literature finds that an imbalance between effort and reward is an important stressor which produces serious health consequences. We incorporate these effects in a simple agency model with moral hazard and limited liability and study the impact on agents’ effort and utility, as well as incentive pay provision, assuming agents differ in stress susceptibility. We test main model’s implications using the 2015 wave of the European Working Condition Survey. We find that individuals who are more susceptible to stress work harder and have lower subjective well-being. The likelihood of receiving incentive pay is not monotone in stress susceptibility.

Suggested Citation

  • Elena Cottini & Paolo Ghinetti & Elisabetta Iossa & Pierluigi Sacco, 2023. "Stress, effort, and incentives at work," Oxford Economic Papers, Oxford University Press, vol. 75(2), pages 325-345.
    • Handle: RePEc:oup:oxecpp:v:75:y:2023:i:2:p:325-345.
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    File URL: http://hdl.handle.net/10.1093/oep/gpac021
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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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