Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/250600 
Year of Publication: 
2021
Series/Report no.: 
IZA Discussion Papers No. 14939
Publisher: 
Institute of Labor Economics (IZA), Bonn
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.
Subjects: 
performance pay
worker health
stress
risk tolerance
JEL: 
J33
I31
J32
Document Type: 
Working Paper

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