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A General Equilibrium Analysis of Parental Leave Policies

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  • Andrés Erosa
  • Luisa Fuster
  • Diego Restuccia

Abstract

An important feature of the U.S. labor market is that, even after controlling for measurable differences in education and experience, the average wage of women with children is 89 percent of the average wage of women without children. This ``family gap\\\" in wages accounts for almost half the gender gap in wages. Proponents of mandatory-leave policies argue that career interruptions associated with fertility have long-lasting effects on female employment and are costly in terms of human-capital losses for females. Despite the fact that mandatory leaves are widely applied in developed countries, their effects on the economy are not well understood. We develop and calibrate a general-equilibrium model of fertility and labor-market decisions to study the quantitative impact of such policies. We build on the Mortensen and Pissarides (1994) labor-market framework by introducing male and female workers, general and specific human-capital accumulation on the job, and temporary separations between the worker and a job. We find that: ($i$) the loss of specific human capital accounts for a small fraction of the wage gaps and ($ii$) mandatory-leave policies have substantial aggregate and redistributive effects on fertility, employment, and welfare. Interestingly, we find that the general-equilibrium effect of mandatory-leave policies is a reduction in the amount of time females spend at home with children.

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Bibliographic Info

Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-197.

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Length: 57 pages
Date of creation: 11 Aug 2005
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-197

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Keywords: Parental leaves; fertility; specific human capital; temporary separations.;

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References

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Citations

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Cited by:
  1. Andres Erosa & Luisa Fuster & Diego Restuccia, 2005. "A quantitative theory of the gender gap in wages," Working Paper 05-09, Federal Reserve Bank of Richmond.
  2. Luca Flabbi and James Mabli, 2012. "Household Search or Individual Search: Does It Matter? Evidence from Lifetime Inequality Estimates," Working Papers gueconwpa~12-12-03, Georgetown University, Department of Economics.
  3. Reich, Nora, 2008. "Das Bundeselterngeld- und Elternzeitgesetz in Deutschland: Analyse potenzieller Effekte auf Geburtenzahl und Fertilitätsstruktur," HWWI Policy Papers 1-10, Hamburg Institute of International Economics (HWWI).
  4. Larry E. Jones & Alice Schoonbroodt & Michèle Tertilt, 2008. "Fertility Theories: Can They Explain the Negative Fertility-Income Relationship?," NBER Working Papers 14266, National Bureau of Economic Research, Inc.
  5. Bick, Alexander, 2011. "The quantitative role of child care for female labor force participation and fertility," MPRA Paper 31713, University Library of Munich, Germany.
  6. Elizabeth M. Caucutt & Nezih Guner & John Knowles, 2001. "The Timing of Births: A Marriage Market Analysis," Penn CARESS Working Papers 49355d43c11f2314075e8b54e, Penn Economics Department.
  7. Eva García-Morán & Zoë Kuehn, 2013. "With Strings Attached: Grandparent-Provided Child Care and Female Labor Market Outcomes," SOEPpapers on Multidisciplinary Panel Data Research 610, DIW Berlin, The German Socio-Economic Panel (SOEP).
  8. Eva Garcia-Moran & Zoe Kuehn, 2012. "With Strings Attached: Grandparent-Provided Child care, Fertility, and Female Labor Market Outcomes," CEPRA working paper 1202, USI Università della Svizzera italiana.
  9. Andres Erosa & Luisa Fuster & Diego Restuccia, 2010. "A General Equilibrium Analysis of Parental Leave Policies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(4), pages 742-758, October.
  10. García-Morán, Eva & Kuehn, Zoe, 2013. "With strings attached: Grandparent-provided child care and female labor market outcomes," MPRA Paper 48953, University Library of Munich, Germany.
  11. García-Morán, Eva & Kuehn, Zoe, 2012. "With strings attached: Grandparent-provided child care, fertility, and female labor market outcomes," MPRA Paper 37001, University Library of Munich, Germany.
  12. Raquel Bernal & Anna Fruttero, 2008. "Parental leave policies, intra-household time allocations and children’s human capital," Journal of Population Economics, Springer, vol. 21(4), pages 779-825, October.

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