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The Parental Leave Benefit Reform in Germany: Costs and Labour Market Outcomes of Moving towards the Scandinavian Model

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  • C. Katharina Spieß
  • Katharina Wrohlich

Abstract

Germany is known to have one of the lowest fertility rates among Western European countries and also relatively low employment rates of mothers with young children. Although these trends have been observed during the last decades, the German public has only recently begun discussing these issues. In order to reverse these trends, the German government recently passed a reform of the parental leave benefit system in line with the Scandinavian model. The core piece of the reform is the replacement of the existing means-tested parental leave benefit by a wage-dependent benefit for the period of one year. In this paper we simulate fiscal costs and expected labour market outcomes of this reform. Based on a micro-simulation model for Germany we calculate first-round effects, which assume no behavioural changes and second-round effects, where we take labour supply changes into account. Our results show that on average all income groups, couples and single households, benefit from the reform. The calculation of overall costs of the reform shows that the additional costs are moderate. As far as the labour market behaviour of parents is concerned, we find no significant changes of labour market outcomes in the first year after birth. However, in the second year, mothers increase their working hours and labour market participation significantly. Our results suggest that the reform will achieve one of its aims, namely the increase in the labour market participation of mothers with young children.

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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 630.

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Length: 22 p.
Date of creation: 2006
Date of revision:
Handle: RePEc:diw:diwwpp:dp630

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Keywords: female labour supply; parental leave; micro simulation study;

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References

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Cited by:
  1. Drasch, Katrin, 2011. "Do changing institutional settings matter? : educational attainment and family related employment interruptions in Germany," IAB Discussion Paper 201113, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  2. Irene Lapuerta & Pau Baizán & María González, 2011. "Individual and Institutional Constraints: An Analysis of Parental Leave Use and Duration in Spain," Population Research and Policy Review, Springer, vol. 30(2), pages 185-210, April.
  3. Caliendo, Marco, 2009. "Income support systems, labor market policies and labor supply: the German experience," Working Paper Series 2009:26, IFAU - Institute for Evaluation of Labour Market and Education Policy.

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