Employment Contracts and Stress: Experimental Evidence

Citation

Allan J, Andelic N, Bender K, Powell D, Stoffel S & Theodossiou I (2021) Employment Contracts and Stress: Experimental Evidence. Journal of Economic Behavior and Organization, 187, pp. 360-373. https://doi.org/10.1016/j.jebo.2021.04.015

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.

Keywords
Perfomance-related pay; Stress; Experiment; Cortisol

Journal
Journal of Economic Behavior and Organization: Volume 187

People

Professor Julia Allan

Professor in Psychology, Psychology