Abstract: This study is the first to systematically examine the association between performance pay and marital instability. Using German survey data on married couples and including an extensive set of controls, we show that performance pay is associated with an increased probability of subsequent 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 holds in instrumental variable estimations accounting for the endogeneity of performance pay. We argue that the pattern fits theoretical expectations and discuss the implications.

DOI: https://doi.org/10.1007/s11150-024-09738-1 

Abstract: While performance pay can benefit firms and workers by increasing productivity and wages, it has also been associated with a deterioration of worker health. The transmission mechanisms for this deterioration remain in doubt. We examine the hypothesis that increased stress is one transmission mechanism. Using unique survey data from the German Socio-Economic Panel, we find performance pay consistently and importantly associates with greater stress even controlling for a long list of economic, social and personality characteristics. The finding also holds in instrumental variable estimations accounting for the potential endogeneity of performance pay. Moreover, we show that risk tolerance and locus of control moderate the relationship between performance pay and stress. Among workers receiving performance pay, the risk tolerant and those believing they can control their environment suffer to a lesser degree from stress.

DOI: https://doi.org/10.1016/j.jebo.2022.07.003 

Abstract: Previous studies show that performance pay can benefit firms and workers by increasing productivity and wages. Yet, performance pay can also have unintended consequences for worker health. Using data from the German Socio-Economic Panel, we examine the hypothesis that alcohol use as “self-medication” is a natural response to the stress and uncertainty associated with performance pay. We find that the likelihood of consuming each of four types of alcohol (beer, wine, spirits, and mixed drinks) is higher for those receiving performance pay even controlling for a long list of economic, social, and personality characteristics and in sensible instrumental variable estimates. We also show that the number of types of alcohol consumed is larger for those receiving performance pay and that the intensity of consumption increases.

DOI: https://doi.org/10.1111/irel.12301 

Abstract: Increased wages and productivity associated with performance pay can be beneficial to both employers and employees. However, performance pay can also entail unintended consequences for workers’ well-being. This study is the first to systematically examine the association between performance pay and loneliness, a significant social well-being concern. Using representative survey data from Germany, I find that performance pay is positively associated with incidence, dimensions, and intensity of loneliness. Correspondingly, performance pay is negatively associated with social life satisfaction of the workers. The findings also hold in sensible instrumental variable estimations addressing the potential endogeneity of performance pay and in various robustness checks. Investigating the potential role of moderating factors reveals that the association between performance pay and loneliness is particularly large for private sector employees. Finally, implications are discussed.

Abstract: Using German survey data, we show that performance pay is associated with a substantially lower gender hours gap. While performance pay increases the work hours of both men and women, the increase is much larger for women than for men. This finding persists in worker fixed effects estimates. We argue our finding likely reflects differences in household production and specialization by gender. Thus, we show that performance pay is not associated with increased hours for men with children in the household. Yet, performance pay is associated with a very large increase in hours for women with children in the household.

Abstract: Overeducated workers are more productive and have higher wages in comparison to their adequately educated coworkers in the same jobs. However, they face a series of challenges in the labor market, including lower wages in comparison to their similarly educated peers who are in correctly matched jobs. Yet, less consensus exists over the adjustment mechanisms to overcome the negative consequences of overeducation. This study examines the hypotheses that overeducated workers sort into performance pay jobs as an adjustment mechanism and that performance pay moderates their wages. Using German Socio-Economic Panel, I show that overeducation associates with a higher likelihood of sorting into performance pay jobs and that performance pay moderates the wages of overeducated workers positively. It also holds in endogenous switching regressions accounting for the potential endogeneity of performance pay. Importantly, the positive role of performance pay is particularly larger for the wages of overeducated women.

Abstract: Concerns about corporate scandals and abusive leadership suggest that individuals with an opportunistic and manipulative personality take advantage of incomplete incentive and control systems to get their way into managerial positions. Against this background, we examine whether there is an association between Machiavellianism and occupying a managerial position. We suggest how to incorporate the psychological concept of Machiavellianism into agency theory and hypothesize that individuals scoring high on Machiavellianism are more likely to attain and keep a managerial position. Using a large and representative panel dataset from Germany, our empirical analysis confirms a strong and positive relationship between Machiavellianism and occupying a managerial position. This result holds in various robustness checks and in instrumental variable estimations accounting for possible endogeneity. Furthermore, our analysis provides evidence that the relationship is monotone; i.e., those with the highest scores of Machiavellianism are most likely to be managers. It also suggests that the direction of influence runs from Machiavellianism to occupational status and not vice versa.