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Performance-related pay and sorting into stress

Author

Listed:
  • Nicole Andelic
  • Julia Allan
  • Keith A Bender
  • Daniel Powell
  • Ioannis Theodossiou

Abstract

To date, the literature on the performance-related pay (PRP) and health relationship has focused on self-reported data. This article uses an experimental method to examine the effect of PRP on stress measured by salivary cortisol for those who self-selected into a PRP contract, focusing on whether participants who perceive themselves with higher ability self-select into PRP and exhibit different stress changes compared to those not in a PRP scheme. Results show that self-selected PRP participants demonstrate significantly higher cortisol levels than participants in the non-PRP group. This study suggests that, regardless of sorting, PRP leads to higher physiological stress.

Suggested Citation

  • Nicole Andelic & Julia Allan & Keith A Bender & Daniel Powell & Ioannis Theodossiou, 2025. "Performance-related pay and sorting into stress," Oxford Economic Papers, Oxford University Press, vol. 77(4), pages 938-953.
    • Handle: RePEc:oup:oxecpp:v:77:y:2025:i:4:p:938-953.
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    File URL: http://hdl.handle.net/10.1093/oep/gpaf008
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    Keywords

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    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • I0 - Health, Education, and Welfare - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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