Performance-related pay and sorting into stress

Nicole Andelic, Julia Allan, Keith Bender, Daniel Powell and Ioannis Theodossiou

Oxford Economic Papers, 2025, vol. 77, issue 4, 938-953

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.

Keywords: performance-related pay; stress; experiment; cortisol (search for similar items in EconPapers)
JEL-codes: C91 I0 J33 (search for similar items in EconPapers)
Date: 2025
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