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Employer Responses to Family Leave Programs

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  • Rita Ginja
  • Arizo Karimi
  • Pengpeng Xiao

Abstract

Search frictions make worker turnover costly to firms. A three-month parental leave expansion in Sweden provides exogenous variation that we use to quantify firms' adjustment costs upon worker absence. The reform increased women's leave duration and likelihood of separating from pre-birth employers. Firms with greater exposure to the reform hired additional workers and increased coworkers to make it coworkers' hours, incurring wage costs corresponding to 10 full-time equivalent months in addition to replacing the workers. These adjustment costs varied by firms' availability of internal substitutes. We also analyze a daddy-month reform and find similar employer responses to male workers' leave, albeit smaller in magnitude.

Suggested Citation

  • Rita Ginja & Arizo Karimi & Pengpeng Xiao, 2023. "Employer Responses to Family Leave Programs," American Economic Journal: Applied Economics, American Economic Association, vol. 15(1), pages 107-135, January.
    • Handle: RePEc:aea:aejapp:v:15:y:2023:i:1:p:107-35
    DOI: 10.1257/app.20200448
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    Cited by:

    1. Ilaria D'Angelis, 2023. "The Search for Parental Leave and the Early-Career Gender Wage Gap," Working Papers 2023-01, University of Massachusetts Boston, Economics Department.
    2. Kai Fischer, 2023. "Skilled Labour Migration and Firm Performance: Evidence from English Hospitals and Brexit," CESifo Working Paper Series 10747, CESifo.
    3. Schmutte, Ian M. & Skira, Meghan M., 2020. "The Response of Firms to Maternity Leave and Sickness Absence," GLO Discussion Paper Series 691, Global Labor Organization (GLO).
    4. Cecilia Machado & Valdemar Neto & Christiane Szerman, 2023. "Firm and Worker Responses to Extensions in Paid Maternity Leave," CESifo Working Paper Series 10736, CESifo.
    5. Peter Blair & Benjamin Posmanick, 2023. "Why Did Gender Wage Convergence in the United States Stall?," Working Papers 2023-001, Human Capital and Economic Opportunity Working Group.
    6. Canaan, Serena & Lassen, Anne Sophie & Rosenbaum, Philip & Steingrimsdottir, Herdis, 2022. "Maternity Leave and Paternity Leave: Evidence on the Economic Impact of Legislative Changes in High Income Countries," IZA Discussion Papers 15129, Institute of Labor Economics (IZA).
    7. Albanesi, Stefania & Olivetti, Claudia & Petrongolo, Barbara, 2022. "Families, labor markets and policy," LSE Research Online Documents on Economics 118038, London School of Economics and Political Science, LSE Library.
    8. Bana, Sarah & Bedard, Kelly & Rossin-Slater, Maya & Stearns, Jenna, 2023. "Unequal use of social insurance benefits: The role of employers," Journal of Econometrics, Elsevier, vol. 233(2), pages 633-660.
    9. Katrin Huber & Geske Rolvering, 2023. "Public child care and mothers’ career trajectories," CEPA Discussion Papers 64, Center for Economic Policy Analysis.
    10. Ann P. Bartel & Maya Rossin-Slater & Christopher J. Ruhm & Meredith Slopen & Jane Waldfogel, 2021. "The Impact of Paid Family Leave on Employers: Evidence from New York," NBER Working Papers 28672, National Bureau of Economic Research, Inc.
    11. Machado, Cecilia & Neto, Valdemar & Szerman, Christiane, 2023. "Firm and Worker Responses to Extensions in Paid Maternity Leave," IZA Discussion Papers 16555, Institute of Labor Economics (IZA).
    12. Jose Garcia-Louzao & Ruben Perez-Sanz, 2024. "Women’s Voice at Work and Family-Friendly Firms," Bank of Lithuania Working Paper Series 120, Bank of Lithuania.
    13. Freiberg Tracey, 2023. "Families first: A comparative study of company responses to paid care leave programs in the COVID-19 pandemic," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 13(1), pages 1-47, January.
    14. Huebener, Mathias & Jessen, Jonas & Kühnle, Daniel & Oberfichtner, Michael, 2021. "A Firm-Side Perspective on Parental Leave," IZA Discussion Papers 14478, Institute of Labor Economics (IZA).
    15. Bamieh, Omar & Ziegler, Lennart, 2023. "Gender-age differences in hiring rates and prospective wages—Evidence from job referrals to unemployed workers," Labour Economics, Elsevier, vol. 83(C).
    16. Rettl, Daniel A. & Schandlbauer, Alexander & Trandafir, Mircea, 2022. "Employee Health and Firm Performance," IZA Discussion Papers 15147, Institute of Labor Economics (IZA).
    17. Healy, Olivia & Heissel, Jennifer A., 2024. "Baby Bumps in the Road: The Impact of Parenthood on Job Performance, Human Capital, and Career Advancement," IZA Discussion Papers 16743, Institute of Labor Economics (IZA).
    18. Elena Del Rey & Maria Racionero & Jose I. Silva, 2023. "Employer vs Government Parental Leave: Labour Market Effects," ANU Working Papers in Economics and Econometrics 2023-692, Australian National University, College of Business and Economics, School of Economics.

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    JEL classification:

    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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