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Can financial incentives reduce the baby gap? Evidence from a reform in maternity leave benefits

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  • Raute, Anna

Abstract

To assess whether earnings-dependent maternity leave positively impacts fertility and narrows the baby gap between high educated (high earning) and low educated (low earning) women, I exploit a major maternity leave benefit reform in Germany that considerably increases the financial incentives for higher educated and higher earning women to have a child. In particular, I use the large differential changes in maternity leave benefits across education and income groups to estimate the effects on fertility up to 5 years post reform. In addition to demonstrating an up to 22% increase in the fertility of tertiary educated versus low educated women, I find a positive, statistically significant effect of increased benefits on fertility, driven mainly by women at the middle and upper end of the education and income distributions. Overall, the results suggest that earnings-dependent maternity leave benefits, which compensate women commensurate with their opportunity cost of childbearing, could successfully reduce the fertility rate disparity related to mothers’ education and earnings.

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  • Raute, Anna, 2017. "Can financial incentives reduce the baby gap? Evidence from a reform in maternity leave benefits," CEPR Discussion Papers 12350, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12350
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    Cited by:

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    2. Kamhöfer, Daniel A. & Westphal, Matthias, 2017. "Fertility effects of college education: Evidence from the German educational expansion," Ruhr Economic Papers 717, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Libertad González & Sofia Karina Trommlerová, 2023. "Cash Transfers and Fertility: How the Introduction and Cancellation of a Child Benefit Affected Births and Abortions," Journal of Human Resources, University of Wisconsin Press, vol. 58(3), pages 783-818.
    4. Farré, Lídia & González, Libertad, 2019. "Does paternity leave reduce fertility?," Journal of Public Economics, Elsevier, vol. 172(C), pages 52-66.
    5. Katrin Huber, 2019. "The role of the career costs of children for the effect of public child care on fertility and maternal employment," Working Papers 185, Bavarian Graduate Program in Economics (BGPE).
    6. Paula E. Gobbi & Juliane Parys & Gregor Schwerhoff, 2018. "Intra‐household allocation of parental leave," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(1), pages 236-274, February.
    7. Marcus Tamm, 2018. "Fathers’ Parental Leave-Taking, Childcare Involvement and Mothers’ Labor Market Participation," SOEPpapers on Multidisciplinary Panel Data Research 1006, DIW Berlin, The German Socio-Economic Panel (SOEP).
    8. Jessen, Jonas & Jessen, Robin & Kluve, Jochen, 2019. "Punishing potential mothers? Evidence for statistical employer discrimination from a natural experiment," Labour Economics, Elsevier, vol. 59(C), pages 164-172.
    9. Welteke, Clara & Wrohlich, Katharina, 2019. "Peer effects in parental leave decisions," Labour Economics, Elsevier, vol. 57(C), pages 146-163.
    10. Matthias Doepke & Fabian Kindermann, 2019. "Bargaining over Babies: Theory, Evidence, and Policy Implications," American Economic Review, American Economic Association, vol. 109(9), pages 3264-3306, September.
    11. Huebener, Mathias & Kuehnle, Daniel & Spiess, C. Katharina, 2019. "Parental leave policies and socio-economic gaps in child development: Evidence from a substantial benefit reform using administrative data," Labour Economics, Elsevier, vol. 61(C).
    12. Cygan-Rehm, Kamila & Kuehnle, Daniel & Riphahn, Regina T., 2018. "Paid parental leave and families’ living arrangements," Labour Economics, Elsevier, vol. 53(C), pages 182-197.
    13. Damian Clarke & Sonia Oreffice & Climent Quintana‐Domeque, 2019. "The demand for season of birth," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 34(5), pages 707-723, August.
    14. Daniel Kamhoefer & Matthias Westphal, 2017. "Fertility Effects of College Education: Evidence from the German Educational Expansion," CINCH Working Paper Series 1705, Universitaet Duisburg-Essen, Competent in Competition and Health.
    15. Katrin Huber, 2019. "Changes in parental leave and young children’s non-cognitive skills," Review of Economics of the Household, Springer, vol. 17(1), pages 89-119, March.
    16. Liepmann, Hannah, 2018. "The impact of a negative labor demand shock on fertility – Evidence from the fall of the Berlin Wall," Labour Economics, Elsevier, vol. 54(C), pages 210-224.
    17. Amadeo Fuenmayor & Rafael Granell & Mauro Mediavilla, 2018. "The effects of separate taxation on labor participation of married couples. An empirical analysis using propensity score," Review of Economics of the Household, Springer, vol. 16(2), pages 541-561, June.
    18. Gerards, Ruud & Theunissen, Pomme, 2018. "Becoming a mompreneur: Parental leave policies and mothers' propensity for self-employment," ROA Research Memorandum 006, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    19. Holger Stichnoth, 2020. "Short-run fertility effects of parental leave benefits: evidence from a structural model," Empirical Economics, Springer, vol. 59(1), pages 143-168, July.
    20. Josefine Koebe & Jan Marcus, 2020. "The Impact of the Length of Schooling on the Timing of Family Formation," Discussion Papers of DIW Berlin 1896, DIW Berlin, German Institute for Economic Research.
    21. Sandner, Malte, 2019. "Effects of early childhood intervention on fertility and maternal employment: Evidence from a randomized controlled trial," Journal of Health Economics, Elsevier, vol. 63(C), pages 159-181.
    22. Lídia Farré & Libertad González, 2017. "The Effects of Paternity Leave on Fertility and Labor Market Outcomes," Working Papers 978, Barcelona School of Economics.
    23. Natalie Malak & Md Mahbubur Rahman & Terry A. Yip, 2019. "Baby bonus, anyone? Examining heterogeneous responses to a pro-natalist policy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 32(4), pages 1205-1246, October.
    24. Mathias Huebener & Daniel Kuehnle & C. Katharina Spiess, 2017. "Paid Parental Leave and Child Development: Evidence from the 2007 German Parental Benefit Reform and Administrative Data," Discussion Papers of DIW Berlin 1651, DIW Berlin, German Institute for Economic Research.

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    More about this item

    Keywords

    Fertility; Fertility gaps; Paid maternity leave;
    All these keywords.

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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