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Parental Allowance Increase and Labour Supply: Evidence from a Czech Reform

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  • Jakub Grossmann
  • Filip Pertold
  • Michal Soltes

Abstract

We study the effect of a CZK 80,000 (36%) increase in parental allowance, a universal basic income-type benefit, on the labor supply of parents in the Czech Republic. Drawing a parental allowance does not preclude labor market activity, which allows us to study the income effect. After the reform, mothers substantially prolonged the average period they drew an allowance. The labor market participation of mothers of young children decreased by 6 percentage points (15%). The estimated effect corresponds to a non-labor income labor supply elasticity at the extensive margin of about -0.5. The effect is particularly strong among mothers with their first child (10 p.p. or 28%) and among university-educated mothers (16 p.p. or 36%). We observe a virtually identical reduction in hours worked. We found no effect on the labor supply of fathers.

Suggested Citation

  • Jakub Grossmann & Filip Pertold & Michal Soltes, 2023. "Parental Allowance Increase and Labour Supply: Evidence from a Czech Reform," CERGE-EI Working Papers wp742, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp742
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    References listed on IDEAS

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    1. Alzbeta Mullerova, 2017. "Family policy and maternal employment in the Czech transition: a natural experiment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 30(4), pages 1185-1210, October.
    2. Ethan M.J. Lieber & Lee M. Lockwood, 2013. "Costs and Benefits of In-Kind Transfers: The Case of Medicaid Home Care Benefits," Working Papers wp294, University of Michigan, Michigan Retirement Research Center.
    3. Tamm Marcus, 2010. "Child Benefit Reform and Labor Market Participation," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(3), pages 313-327, June.
    4. Timo Hener, 2016. "Unconditional Child Benefits, Mothers’ Labor Supply, and Family Well-Being: Evidence from a Policy Reform," CESifo Economic Studies, CESifo Group, vol. 62(4), pages 624-649.
    5. Garay, Candelaria & Palmer-Rubin, Brian & Poertner, Mathias, 2020. "Organizational and partisan brokerage of social benefits: Social policy linkages in Mexico," World Development, Elsevier, vol. 136(C).
    6. Bičáková, Alena & Kalíšková, Klára, 2019. "(Un)intended effects of parental leave policies: Evidence from the Czech Republic," Labour Economics, Elsevier, vol. 61(C).
    7. Ruth Hancock & Marcello Morciano & Stephen Pudney, 2019. "Public Support for Older Disabled People: Evidence from the English Longitudinal Study of Ageing on Receipt of Disability Benefits and Social Care Subsidy," Fiscal Studies, John Wiley & Sons, vol. 40(1), pages 19-43, March.
    8. Tuomas Matikka & Tuuli Paukkeri, 2022. "Does sending letters increase the take-up of social benefits? Evidence from a new benefit program," Empirical Economics, Springer, vol. 63(6), pages 3253-3287, December.
    9. Ethan M. J. Lieber & Lee M. Lockwood, 2019. "Targeting with In-Kind Transfers: Evidence from Medicaid Home Care," American Economic Review, American Economic Association, vol. 109(4), pages 1461-1485, April.
    10. Barbara Pertold-Gebicka, 2020. "Parental leave length and mothers’ careers: what can be inferred from occupational allocation?," Applied Economics, Taylor & Francis Journals, vol. 52(9), pages 879-904, February.
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    Cited by:

    1. Filip Pertold & Sofiana Sinani & Michal Soltes, 2023. "Gender Gap in Reported Childcare Preferences among Parents," CERGE-EI Working Papers wp770, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

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    More about this item

    Keywords

    Parental allowance; Maternal labor supply; Income effect of social policy; Czech Republic;
    All these keywords.

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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