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A General Equilibrium Analysis of Parental Leave Policies

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  • Andres Erosa
  • Luisa Fuster
  • Diego Restuccia

Abstract

Despite mandatory parental leave policies being a prevalent feature of labor markets in developed countries, their aggregate effects in the economy are not well understood. To assess their quantitative impact, we develop a general equilibrium model of fertility and labor market decisions that builds on the labor matching framework of Mortensen and Pissarides (1994). We find that females gain substantially with generous policies but this benefit occurs at the expense of a reduction in the welfare of males. Leave policies have important effects on fertility, leave taking decisions, and employment. These effects are mainly driven by how the policy affects bargaining -- young females anticipate future states with higher threat points induced by the policy. Because the realization of these states depend on the decisions of females to give birth and take a leave, leave policies effectively subsidize fertility and leave taking. We also find that generous paid parental leaves can be an effective tool to encourage mothers to spend time with their children after giving birth.

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Bibliographic Info

Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-385.

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Length: 41 pages
Date of creation: 30 Dec 2009
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-385

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Keywords: human capital; labor market equilibrium; parental leave policies; fertility; temporary separations;

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References

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Citations

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Cited by:
  1. Andrés Erosa & Luisa Fuster & Diego Restuccia, 2005. "A General Equilibrium Analysis of Parental Leave Policies," Working Papers tecipa-197, University of Toronto, Department of Economics.
  2. 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).
  3. Nezih Guner & Ezgi Kaya & Virginia Sánchez-Marcos, 2014. "Gender gaps in Spain: policies and outcomes over the last three decades," SERIEs, Spanish Economic Association, vol. 5(1), pages 61-103, March.
  4. Andrés Erosa & Luisa Fuster & Diego Restuccia, 2010. "A quantitative theory of the gender gap in wages," Working Papers 2010-04, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales, revised 20 Oct 2010.
  5. Elizabeth M. Caucutt & Nezih Guner & John Knowles, 2001. "The Timing of Births: A Marriage Market Analysis," Penn CARESS Working Papers 49355d43c11f2314075e8b54e, Penn Economics Department.
  6. 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.
  7. Guner, Nezih & Kaygusuz, Remzi & Ventura, Gustavo, 2014. "Childcare Subsidies and Household Labor Supply," IZA Discussion Papers 8303, Institute for the Study of Labor (IZA).
  8. 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.
  9. 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.
  10. 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.
  11. 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).
  12. Bick, Alexander, 2010. "The quantitative role of child care for female labor force participation and fertility," MPRA Paper 25474, University Library of Munich, Germany.
  13. 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.
  14. 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.

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