Worker Stress and Performance Pay: German Survey Evidence

Mehrzad B. Baktash, John Heywood and Uwe Jirjahn

No 14939, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: 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.

Keywords: stress; worker health; performance pay; risk tolerance (search for similar items in EconPapers)
JEL-codes: I31 J32 J33 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2021-12
New Economics Papers: this item is included in nep-bec, nep-hea and nep-lma
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Published - revised version published in: Journal of Economic Behavior and Organization, 2022, 201, 276-291

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Journal Article: Worker stress and performance pay: German survey evidence (2022)
Working Paper: Worker Stress and Performance Pay: German Survey Evidence (2021)
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