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Competition and Career Advancement: The Hidden Costs of Paid Leave

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  • Salvanes, Kjell G
  • Johnsen, Julian Vedeler
  • Ku, Hyejin

Abstract

Does leave-taking matter for young workers’ careers? If so, why? We propose the competition effect—relative leave status of workers affecting their relative standing inside the firm—as a new explanation. Exploiting a policy reform that exogenously assigned four-week paid paternity leave to some new fathers, we find evidence consistent with the competition effect: A worker enjoys a better post-child earnings trajectory when a larger share of his colleagues take leave because of the policy. In contrast, we find no direct earnings effect resulting from the worker’s own leave when controlling for their relative leave eligibility status within the firm.

Suggested Citation

  • Salvanes, Kjell G & Johnsen, Julian Vedeler & Ku, Hyejin, 2020. "Competition and Career Advancement: The Hidden Costs of Paid Leave," CEPR Discussion Papers 15157, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15157
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    2. 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.
    3. Thomas Høgholm Jørgensen & Jakob Egholt Søgaard, 2021. "Welfare Reforms and the Division of Parental Leave," CESifo Working Paper Series 9035, CESifo.
    4. 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).

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    More about this item

    Keywords

    Leave of absence; Career interruptions; Ranking; Tournament; Promotion; Gender gap;
    All these keywords.

    JEL classification:

    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • 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
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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