Performance Pay and Stress: An Experimental Study

Citation

Allan J, Bender {A & Theodossiou I (2017) Performance Pay and Stress: An Experimental Study. University of Aberdeen. Discussion Paper in Economics, 17-5. Aberdeen: University of Aberdeen: Business School.

Abstract
Recent economics literature suggests a link between performance pay and ill health, potentially through the adverse effects of performance pay on stress. This project examines this issue using an experimental design that purges the effects of self-selection into performance pay and identifies the direction of causation from performance pay to stress. Results find that those who are paid for their performance experience higher levels of stress, both in terms of perceived stress and objectively measured cortisol levels, than those who are paid by a minimum performance contract.

Keywords
performance-related pay, real-effort experiment, stress, cortisol

Notes
Acknowledgements: The financial support for this study by the Scottish Economic Society is gratefully acknowledged and appreciated. We are grateful for helpful comments by participants at the 2016 Scottish Economic Society Conference and seminar participants at the University of Aberdeen and the Université Panthéon-Assas as well as Daniel Powell. Help with z-tree programming from Maria Bigoni is also greatly appreciated. All errors remain with the authors.