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Does Performance Pay Increase Alcohol and Drug Use?

Author

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  • Colin Green

    (Department of Economics, Norwegian University of Science and Technology)

  • John Heywood

    (Department of Economics, University of Wisconsin-Milwaukee)

  • Ben Artz

    (University of Wisconsin-Oshkosh)

Abstract

Using a panel of young workers, we show cross-sectional evidence of greater alcohol and illicit drug use among those paid performance pay. Recognizing that this likely reflects worker sorting, we first control for risk and ability proxies. We then control for worker fixed effects and finally for worker-employer match fixed effects. These estimates continue to indicate that the risk of substance use increases when workers are moved to performance pay. While robustness tests examine heterogeneous responses, our evidence fits conjectures that stress and effort increase with performance pay as does the spillover coping mechanism of alcohol and drug use.

Suggested Citation

  • Colin Green & John Heywood & Ben Artz, 2018. "Does Performance Pay Increase Alcohol and Drug Use?," Working Paper Series 17618, Department of Economics, Norwegian University of Science and Technology.
    • Handle: RePEc:nst:samfok:17618
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    Cited by:

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    3. Mehrzad B. Baktash & John S. Heywood & Uwe Jirjahn, 2022. "Performance pay and alcohol use in Germany," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 353-383, October.
    4. Baktash, Mehrzad B. & Heywood, John S. & Jirjahn, Uwe, 2023. "Does Performance Pay Increase the Risk of Marital Instability?," GLO Discussion Paper Series 1305, Global Labor Organization (GLO).
    5. David Butler & Robert Butler & Robert Simmons, 2022. "Contracts, pay and performance in the sport of kings: Evidence from horse racing," British Journal of Industrial Relations, London School of Economics, vol. 60(1), pages 152-175, March.
    6. Baktash, Mehrzad B. & Heywood, John S. & Jirjahn, Uwe, 2022. "Worker stress and performance pay: German survey evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 201(C), pages 276-291.
    7. Nicole Andelic & Julia Allan & Keith A. Bender & Daniel Powell & Ioannis Theodossiou, 2024. "Performance‐related pay, mental and physiological health," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 63(1), pages 3-25, January.
    8. Green, Colin P. & Heywood, John S., 2022. "Does Performance Pay Influence Hours of Work?," IZA Discussion Papers 15474, Institute of Labor Economics (IZA).
    9. Adams, Scott J. & Heywood, John S. & Ullman, Darin F. & Venkatesh, Shrathinth, 2022. "Social jobs and the returns to drinking," Economics & Human Biology, Elsevier, vol. 46(C).
    10. Green, Colin P. & Heywood, John S., 2023. "Performance pay, work hours and employee health in the UK," Labour Economics, Elsevier, vol. 84(C).

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    More about this item

    Keywords

    Performance Pay; Alcohol; Drugs; Sorting;
    All these keywords.

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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