IDEAS home Printed from https://ideas.repec.org/p/trr/wpaper/202306.html
   My bibliography  Save this paper

Does Performance Pay Increase the Risk of Marital Instability?

Author

Listed:
  • Mehrzad B. Baktash
  • John S. Heywood
  • Uwe Jirjahn

Abstract

This paper uses German survey data on married couples to examine the association of performance pay at work and subsequent separation or divorce. Despite extensive controls, performance pay remains associated with an increased probability of separation or divorce. Yet, the results are entirely gender specific. When husbands earn performance pay, no association with marital instability is found. When wives earn performance pay, the association is large and robust. This pattern persists across a variety of modeling choices and attempts to account for endogeneity. We argue that the pattern fits theoretical expectations and discuss the implications.

Suggested Citation

  • Mehrzad B. Baktash & John S. Heywood & Uwe Jirjahn, 2023. "Does Performance Pay Increase the Risk of Marital Instability?," Research Papers in Economics 2023-06, University of Trier, Department of Economics.
    • Handle: RePEc:trr:wpaper:202306
    as

    Download full text from publisher

    File URL: http://www.uni-trier.de/fileadmin/fb4/prof/VWL/EWF/Research_Papers/2023-06.pdf
    File Function: First version, 2023
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Keane, Michael P., 2010. "Structural vs. atheoretic approaches to econometrics," Journal of Econometrics, Elsevier, vol. 156(1), pages 3-20, May.
    2. Wo[ss]mann, Ludger & West, Martin, 2006. "Class-size effects in school systems around the world: Evidence from between-grade variation in TIMSS," European Economic Review, Elsevier, vol. 50(3), pages 695-736, April.
    3. Paarsch, Harry J & Shearer, Bruce, 2000. "Piece Rates, Fixed Wages, and Incentive Effects: Statistical Evidence from Payroll Records," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 59-92, February.
    4. Sheila Krein & Andrea Beller, 1988. "Educational attainment of children from single-parent families: Differences by exposure, gender, and race," Demography, Springer;Population Association of America (PAA), vol. 25(2), pages 221-234, May.
    5. Jones, A., 2007. "Applied Econometrics for Health Economists: A Practical Guide," Monographs, Office of Health Economics, number 000262.
    6. Julia Bredtmann, 2014. "The Intra-household Division of Labor: An Empirical Analysis of Spousal Influences on Individual Time Allocation," LABOUR, CEIS, vol. 28(1), pages 1-39, March.
    7. Alberto Bayo-Moriones & Jose Enrique Galdon-Sanchez & Sara Martinez-De-Morentin, 2013. "The Diffusion of Pay for Performance across Occupations," ILR Review, Cornell University, ILR School, vol. 66(5), pages 1115-1148, October.
    8. Grund, Christian & Sliwka, Dirk, 2010. "Evidence on performance pay and risk aversion," Economics Letters, Elsevier, vol. 106(1), pages 8-11, January.
    9. Francine D. Blau & Lawrence M. Kahn, 2017. "The Gender Wage Gap: Extent, Trends, and Explanations," Journal of Economic Literature, American Economic Association, vol. 55(3), pages 789-865, September.
    10. Heywood, John S. & Wei, Xiangdong & Ye, Guangliang, 2011. "Piece rates for professors," Economics Letters, Elsevier, vol. 113(3), pages 285-287.
    11. Marianne Bertrand & Emir Kamenica & Jessica Pan, 2015. "Gender Identity and Relative Income within Households," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(2), pages 571-614.
    12. Artz, Benjamin & Heywood, John S., 2022. "Performance Pay and Work Hours: US Survey Evidence," IZA Discussion Papers 15412, Institute of Labor Economics (IZA).
    13. Scott Drewianka & Martin E. Meder, 2020. "Simultaneity and selection in financial hardship and divorce," Review of Economics of the Household, Springer, vol. 18(4), pages 1245-1265, December.
    14. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    15. Victor Lavy, 2009. "Performance Pay and Teachers' Effort, Productivity, and Grading Ethics," American Economic Review, American Economic Association, vol. 99(5), pages 1979-2011, December.
    16. Ziteng Lei, 2022. "Short-run and long-run effects of peers from disrupted families," Journal of Population Economics, Springer;European Society for Population Economics, vol. 35(3), pages 1007-1036, July.
    17. Gigi Foster & Leslie S. Stratton, 2021. "Does female breadwinning make partnerships less healthy or less stable?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(1), pages 63-96, January.
    18. Daniel Parent, 1999. "Methods of Pay and Earnings: A Longitudinal Analysis," ILR Review, Cornell University, ILR School, vol. 53(1), pages 71-86, October.
    19. Tuomas Pekkarinen & Chris Riddell, 2008. "Performance Pay and Earnings: Evidence from Personnel Records," ILR Review, Cornell University, ILR School, vol. 61(3), pages 297-319, April.
    20. Nicole M Fortin, 2005. "Gender Role Attitudes and the Labour-market Outcomes of Women across OECD Countries," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 21(3), pages 416-438, Autumn.
    21. Raymond Fisman & Sheena S. Iyengar & Emir Kamenica & Itamar Simonson, 2006. "Gender Differences in Mate Selection: Evidence From a Speed Dating Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 673-697.
    22. Allan, Julia L. & Andelic, Nicole & Bender, Keith A. & Powell, Daniel & Stoffel, Sandro & Theodossiou, Ioannis, 2021. "Employment contracts and stress: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 360-373.
    23. Keith A. Bender & Ioannis Theodossiou, 2014. "The unintended consequences of the rat race: the detrimental effects of performance pay on health," Oxford Economic Papers, Oxford University Press, vol. 66(3), pages 824-847.
    24. Betsey Stevenson & Justin Wolfers, 2007. "Marriage and Divorce: Changes and their Driving Forces," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 27-52, Spring.
    25. Jed DeVaro, 2022. "Performance pay, working hours, and health‐related absenteeism," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 327-352, October.
    26. John S. Heywood & Daniel Parent, 2012. "Performance Pay and the White-Black Wage Gap," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 249-290.
    27. Booth, Alison L & Frank, Jeff, 1999. "Earnings, Productivity, and Performance-Related Pay," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 447-463, July.
    28. Liat Raz-Yurovich, 2012. "Economic Determinants of Divorce Among Dual-Earner Couples: Jews in Israel [Les déterminants économiques du divorce parmi les couples à double revenu : le cas des juifs en Israël]," European Journal of Population, Springer;European Association for Population Studies, vol. 28(2), pages 177-203, May.
    29. Bruce Shearer, 2004. "Piece Rates, Fixed Wages and Incentives: Evidence from a Field Experiment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(2), pages 513-534.
    30. Olle Folke & Johanna Rickne, 2020. "All the Single Ladies: Job Promotions and the Durability of Marriage," American Economic Journal: Applied Economics, American Economic Association, vol. 12(1), pages 260-287, January.
    31. Anne Gielen & Marcel Kerkhofs & Jan Ours, 2010. "How performance related pay affects productivity and employment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(1), pages 291-301, January.
    32. James J. Heckman, 2000. "Causal Parameters and Policy Analysis in Economics: A Twentieth Century Retrospective," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 45-97.
    33. Bina Agarwal, 1997. "''Bargaining'' and Gender Relations: Within and Beyond the Household," Feminist Economics, Taylor & Francis Journals, vol. 3(1), pages 1-51.
    34. Benjamin Artz & Colin P. Green & John S. Heywood, 2021. "Does performance pay increase alcohol and drug use?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(3), pages 969-1002, July.
    35. Shelly Lundberg & Robert A. Pollak, 1996. "Bargaining and Distribution in Marriage," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 139-158, Fall.
    36. William Greene, 1998. "Gender Economics Courses in Liberal Arts Colleges: Comment," Working Papers 98-06, New York University, Leonard N. Stern School of Business, Department of Economics.
    37. Alice Zulkarnain & Sanders Korenman, 2019. "Divorce and health in middle and older ages," Review of Economics of the Household, Springer, vol. 17(4), pages 1081-1106, December.
    38. John S. Heywood & Patrick L. O’Halloran, 2005. "Racial Earnings Differentials and Performance Pay," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
    39. Leora Friedberg & Steven N. Stern, 2005. "Economics of marriage and divorce," Chapters, in: Simon W. Bowmaker (ed.), Economics Uncut, chapter 5, Edward Elgar Publishing.
    40. Doss, Cheryl, 2013. "Intrahousehold bargaining and resource allocation in developing countries," Policy Research Working Paper Series 6337, The World Bank.
    41. Kraft, Kornelius & Neimann, Stefanie, 2009. "Effect of Labor Division between Wife and Husband on the Risk of Divorce: Evidence from German Data," IZA Discussion Papers 4515, Institute of Labor Economics (IZA).
    42. 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.
    43. Jed DeVaro & John S. Heywood, 2017. "Performance Pay and Work-Related Health Problems," ILR Review, Cornell University, ILR School, vol. 70(3), pages 670-703, May.
    44. Carole Bonnet & Bertrand Garbinti & Anne Solaz, 2021. "The flip side of marital specialization: the gendered effect of divorce on living standards and labor supply," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(2), pages 515-573, April.
    45. Plümper, Thomas & Troeger, Vera E., 2019. "Not so Harmless After All: The Fixed-Effects Model," Political Analysis, Cambridge University Press, vol. 27(1), pages 21-45, January.
    46. Fisman, Raymond & Svensson, Jakob, 2007. "Are corruption and taxation really harmful to growth? Firm level evidence," Journal of Development Economics, Elsevier, vol. 83(1), pages 63-75, May.
    47. William H. Greene, 1998. "Gender Economics Courses in Liberal Arts Colleges: Further Results," The Journal of Economic Education, Taylor & Francis Journals, vol. 29(4), pages 291-300, January.
    48. John S. Heywood & W. S. Siebert & Xiangdong Wei, 1997. "Payment by Results Systems: British Evidence," British Journal of Industrial Relations, London School of Economics, vol. 35(1), pages 1-22, March.
    49. Richard Belfield & David Marsden, 2003. "Performance pay, monitoring environments, and establishment performance," International Journal of Manpower, Emerald Group Publishing Limited, vol. 24(4), pages 452-471, June.
    50. Uwe Jirjahn & Gesine Stephan, 2004. "Gender, piece rates and wages: evidence from matched employer--employee data," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 28(5), pages 683-704, September.
    51. Inmaculada García-Mainar & José Alberto Molina & Víctor M. Montuenga, 2011. "Gender Differences in Childcare: Time Allocation in Five European Countries," Feminist Economics, Taylor & Francis Journals, vol. 17(1), pages 119-150, January.
    52. Tat‐kei Lai & Travis Ng, 2014. "The impact of product market competition on training provision: Evidence from Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(3), pages 856-888, August.
    53. Uwe Jirjahn, 2016. "Performance Pay and Productivity: A Note on the Moderating Role of a High‐wage Policy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 37(7), pages 507-511, October.
    54. Tatkei Lai & Travis Ng, 2014. "The impact of product market competition on training provision: Evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 47(3), pages 856-888, August.
    55. Agarwal, Bina, 1997. ""Bargaining" and gender relations," FCND discussion papers 27, International Food Policy Research Institute (IFPRI).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. 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.
    3. Benjamin Artz & Colin P. Green & John S. Heywood, 2021. "Does performance pay increase alcohol and drug use?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(3), pages 969-1002, July.
    4. Baktash, Mehrzad B., 2023. "Overeducation, Performance Pay and Wages: Evidence from Germany," GLO Discussion Paper Series 1327, Global Labor Organization (GLO).
    5. Green, Colin P. & Heywood, John S., 2023. "Performance pay, work hours and employee health in the UK," Labour Economics, Elsevier, vol. 84(C).
    6. Uwe Jirjahn & Jens Mohrenweiser, 2021. "Works councils and organizational gender policies in Germany," British Journal of Industrial Relations, London School of Economics, vol. 59(4), pages 1020-1048, December.
    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. Jirjahn, Uwe & Mohrenweiser, Jens, 2023. "Variable Payment Schemes and Productivity: Do Individual-Based Schemes Really Have a Stronger Influence than Collective Ones?," IZA Discussion Papers 16267, Institute of Labor Economics (IZA).
    10. Cornelissen, Thomas & Heywood, John S. & Jirjahn, Uwe, 2011. "Performance pay, risk attitudes and job satisfaction," Labour Economics, Elsevier, vol. 18(2), pages 229-239, April.
    11. Artz, Benjamin & Heywood, John S., 2022. "Performance Pay and Work Hours: US Survey Evidence," IZA Discussion Papers 15412, Institute of Labor Economics (IZA).
    12. Görges, Luise, 2021. "Of housewives and feminists: Gender norms and intra-household division of labour," Labour Economics, Elsevier, vol. 72(C).
    13. Erling Barth & Bernt Bratsberg & Torbjørn Hægeland & Oddbjørn Raaum, 2008. "Performance Pay and Within-Firm Wage Inequality," Discussion Papers 535, Statistics Norway, Research Department.
    14. Luise Görges, 2021. "Of housewives and feminists: Gender norms and intra-household division of labour," Working Paper Series in Economics 400, University of Lüneburg, Institute of Economics.
    15. K. Sommerfeld, 2013. "Higher and higher? Performance pay and wage inequality in Germany," Applied Economics, Taylor & Francis Journals, vol. 45(30), pages 4236-4247, October.
    16. Estefanía Galván, 2022. "Gender Identity and Quality of Employment," Economica, London School of Economics and Political Science, vol. 89(354), pages 409-436, April.
    17. Allan, Julia L. & Andelic, Nicole & Bender, Keith A. & Powell, Daniel & Stoffel, Sandro & Theodossiou, Ioannis, 2021. "Employment contracts and stress: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 360-373.
    18. Uwe Jirjahn & Martha Ottenbacher, 2023. "Big Five personality traits and sex," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(2), pages 549-580, April.
    19. Anja Roth & Michaela Slotwinski, 2018. "Gender Norms and Income Misreporting within Households," CESifo Working Paper Series 7298, CESifo.
    20. Papps, Kerry L., 2010. "Productivity under Large Pay Increases: Evidence from Professional Baseball," IZA Discussion Papers 5133, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Performance Pay; Separation; Divorce; Gender;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:trr:wpaper:202306. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Matthias Neuenkirch (email available below). General contact details of provider: https://edirc.repec.org/data/petride.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.