IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v136y2024ics0264999324001020.html

Employer vs government parental leave: Labour market effects

Author

Listed:
  • Del Rey, Elena
  • Racionero, Maria
  • Silva, Jose I.

Abstract

A relatively large number of firms in Australia and in the US offer employer-funded parental leave to their employees. We introduce employer-funded parental leave in a theoretical labour search and matching model. Firms choose the duration of paid parental leave offered to prospective employees. Matched firms and workers then negotiate wages through a Nash bargaining process. We show that employer-funded leave allows firms to pay lower wages. In this context, extending government-funded parental leave reduces the benefits of employer-funded leave to firms, reducing total leave duration. It also affects equilibrium wages and employment. We calibrate the model using Australian data. We show that increases in both government-funded leave duration and replacement rate can be welfare improving and, in particular, the welfare effects of government leave duration display an inverted U-shape.

Suggested Citation

  • Del Rey, Elena & Racionero, Maria & Silva, Jose I., 2024. "Employer vs government parental leave: Labour market effects," Economic Modelling, Elsevier, vol. 136(C).
    • Handle: RePEc:eee:ecmode:v:136:y:2024:i:c:s0264999324001020
    DOI: 10.1016/j.econmod.2024.106746
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999324001020
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2024.106746?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    2. 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.
    3. Rebecca Edwards, 2006. "Maternity Leave and the Evidence for Compensating Wage Differentials in Australia," The Economic Record, The Economic Society of Australia, vol. 82(258), pages 281-297, September.
    4. Claudia Goldin & Sari Pekkala Kerr & Claudia Olivetti, 2020. "Why Firms Offer Paid Parental Leave: An Exploratory Study," NBER Working Papers 26617, National Bureau of Economic Research, Inc.
    5. Del Rey, Elena & Racionero, Maria & Silva, Jose I., 2017. "On the effect of parental leave duration on unemployment and wages," Economics Letters, Elsevier, vol. 158(C), pages 14-17.
    6. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    7. Peter Q. Blair & Benjamin Posmanick, 2023. "Why Did Gender Wage Convergence in the United States Stall?," NBER Working Papers 30821, National Bureau of Economic Research, Inc.
    8. Felfe, Christina, 2012. "The motherhood wage gap: What about job amenities?," Labour Economics, Elsevier, vol. 19(1), pages 59-67.
    9. 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.
    10. Claudia Olivetti & Barbara Petrongolo, 2017. "The Economic Consequences of Family Policies: Lessons from a Century of Legislation in High-Income Countries," Journal of Economic Perspectives, American Economic Association, vol. 31(1), pages 205-230, Winter.
    11. Xiao, Pengpeng, 2021. "Wage and Employment Discrimination by Gender in Labor Market Equilibrium," Working Papers 144, VATT Institute for Economic Research.
    12. Alessandra Casarico & Elena Del Rey & Jose I. Silva, 2023. "Child care costs, household liquidity constraints, and gender inequality," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(3), pages 1461-1487, July.
    13. Rosen, Sherwin, 1987. "The theory of equalizing differences," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 12, pages 641-692, Elsevier.
    14. Claudia Olivetti & Barbara Petrongolo, 2017. "The Economic Consequences of Family Policies: Lessons from a Century of Legislation," Working Papers 811, Queen Mary University of London, School of Economics and Finance.
    15. Elena Rey & Andreas Kyriacou & José I. Silva, 2021. "Maternity leave and female labor force participation: evidence from 159 countries," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(3), pages 803-824, July.
    16. Del Rey, Elena & Racionero, Maria & Silva, Jose I., 2021. "Labour market effects of reducing the gender gap in parental leave entitlements," Labour Economics, Elsevier, vol. 72(C).
    17. Robert Shimer, 2012. "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 127-148, April.
    18. Girsberger, Esther Mirjam & Hassani-Nezhad, Lena & Karunanethy, Kalaivani & Lalive, Rafael, 2023. "Mothers at work: How mandating a short maternity leave affects work and fertility," Labour Economics, Elsevier, vol. 84(C).
    19. Paula Garda, 2016. "The Ins and Outs of Employment in 25 OECD Countries," OECD Economics Department Working Papers 1350, OECD Publishing.
    20. Claudia Olivetti & Barbara Petrongolo, 2017. "The Economic Consequences of Family Policies: Lessons from a Century of Legislation in High-Income Countries," Journal of Economic Perspectives, American Economic Association, vol. 31(1), pages 205-230, Winter.
    21. Aslim, Erkmen Giray & Panovska, Irina & Taş, M. Anıl, 2021. "Macroeconomic effects of maternity leave legislation in emerging economies," Economic Modelling, Elsevier, vol. 100(C).
    22. Michael W. L. Elsby & Bart Hobijn & Ayşegül Şahin, 2013. "Unemployment Dynamics in the OECD," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 530-548, May.
    23. Spencer Bastani & Tomer Blumkin & Luca Micheletto, 2019. "The Welfare-Enhancing Role of Parental Leave Mandates," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 35(1), pages 77-126.
    24. Barigozzi, Francesca & Cremer, Helmuth & Roeder, Kerstin, 2018. "Women's career choices, social norms and child care policies," Journal of Public Economics, Elsevier, vol. 168(C), pages 162-173.
    25. Christina Felfe, 2012. "The Willingness to Pay for Job Amenities: Evidence from Mothers' Return to Work," ILR Review, Cornell University, ILR School, vol. 65(2), pages 427-454, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Del Rey, Elena & Racionero, Maria & Silva, Jose I., 2021. "Labour market effects of reducing the gender gap in parental leave entitlements," Labour Economics, Elsevier, vol. 72(C).
    2. Francesca Barigozzi & Helmuth Cremer & Emmanuel Thibault, 2024. "The motherhood wage and income traps," Journal of Population Economics, Springer;European Society for Population Economics, vol. 37(4), pages 1-26, December.
    3. Alessandra Casarico & Elena Del Rey & Jose I. Silva, 2023. "Child care costs, household liquidity constraints, and gender inequality," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(3), pages 1461-1487, July.
    4. Timpe, Brenden, 2024. "The labor market impacts of America’s first paid maternity leave policy," Journal of Public Economics, Elsevier, vol. 231(C).
    5. Eva Österbacka & Tapio Räsänen, 2025. "The Importance of Self-Selection and Childcare Leave Length for Child Penalty," European Journal of Population, Springer;European Association for Population Studies, vol. 41(1), pages 1-31, December.
    6. Liu, Hong & Li, Jiaying & Song, Hong & Zou, Xianqiang, 2024. "Unintended consequences of maternity leave entitlements on female labor market outcomes in China," Journal of Economic Behavior & Organization, Elsevier, vol. 228(C).
    7. Cecilia Machado & Valdemar Neto & Christiane Szerman, 2023. "Firm and Worker Responses to Extensions in Paid Maternity Leave," CESifo Working Paper Series 10736, CESifo.
    8. Estefanía Galván & Cecilia Parada & Martina Querejeta & Soledad Salvador, 2024. "Gender Gaps and Family Leaves in Latin America," Review of Economics of the Household, Springer, vol. 22(2), pages 387-414, June.
    9. Lucifora, Claudio & Meurs, Dominique & Villar, Elena, 2021. "The “mommy track” in the workplace. Evidence from a large French firm," Labour Economics, Elsevier, vol. 72(C).
    10. Machado, Cecilia & Neto, Valdemar & Szerman, Christiane, 2023. "Firm and Worker Responses to Extensions in Paid Maternity Leave," IZA Discussion Papers 16555, IZA Network @ LISER.
    11. Regmi, Krishna & Wang, Le, 2022. "Maternity Leave," GLO Discussion Paper Series 1184, Global Labor Organization (GLO).
    12. Ilaria D'Angelis, 2024. "The Search for Parental Leave and the Early-Career Gender Wage Gap," Working Papers 2023-01, University of Massachusetts Boston, Economics Department.
    13. Fitzenberger, Bernd & Seidlitz, Arnim, 2024. "Changing Fertility and Heterogeneous Motherhood Effects: Revisiting the Effects of a Parental Benefits Reform," IZA Discussion Papers 16966, IZA Network @ LISER.
    14. Jan‐luca Hennig & Balazs Stadler, 2023. "Firm‐specific pay premiums and the gender wage gap in Europe," Post-Print hal-04171877, HAL.
    15. 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.
    16. Corekcioglu, Gozde & Francesconi, Marco & Kunze, Astrid, 2024. "Expansions in paid parental leave and mothers’ economic progress," European Economic Review, Elsevier, vol. 169(C).
    17. Kohlbrecher, Britta & Merkl, Christian & Nordmeier, Daniela, 2016. "Revisiting the matching function," Journal of Economic Dynamics and Control, Elsevier, vol. 69(C), pages 350-374.
    18. Miyazaki, Koichi, 2023. "Efficiency-enhancing role of mandatory leave policy in a search-theoretic model of the labor market," MPRA Paper 116614, University Library of Munich, Germany.
    19. Annette Bergemann & Regina T. Riphahn, 2023. "Maternal employment effects of paid parental leave," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(1), pages 139-178, January.
    20. Jorgen M. Harris & Eleonora Patacchini, 2024. "Closing the gender gap: promoting labour market participation," Chapters, in: Stéphane Carcillo & Stefano Scarpetta (ed.), Handbook on Labour Markets in Transition, chapter 24, pages 463-482, Edward Elgar Publishing.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:136:y:2024:i:c:s0264999324001020. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.