RIEB, Kobe University

Does Physical Exercise Affect Tradeoffs between Fixed Pay and Performance-related Pay for Individuals?

Much of the literature on performance-related pay has discussed the relationships with risk attitude, job satisfaction, sorting effects, amongst other factors. This paper focuses on the relationship between individual preferences for physical exercise or sports and the tradeoff between fixed and performance-related pay. First, a choice experiment is used to identify the individual preference for payments, and the tradeoff between fixed and performance-related pay. Next, OLS regression models are used to link the tradeoff with individual preference for physical exercise or sports. The results show that such a preference has a positive and significant influence on individuals' tradeoff of payments. For individuals who like physical exercise or sports more, who are better at them, and who take part in them more frequently, are more likely to prefer performance-related pay.