The Evolution of Child-Related Gender Inequality in Germany and The Role of Family Policies, 1960-2018

Using German administrative data from the 1960s onward, this paper (i) examines the long-term evolution of child-related gender inequality in earnings and (ii) assesses the impact of family policies on this inequality. We present three sets of ï¬ ndings. First, child penalties (i.e., the percentage of potential earnings lost due to children) have strongly increased over the last decades. Mothers who had their ï¬ rst child in the 1960s faced much smaller penalties than those who gave birth in the 2000s. Second, we decompose overall gender inequality into childrelated and child-unrelated components. Over our sample period, the fraction of overall inequality attributed to children rose from 14% to 64%. This trend not only resulted from the growing child penalties but also from rising potential earnings of mothers. Intuitively, in later decades, mothers had more income to lose from child-related career breaks. Third, we investigate the role of policy decisions in this rise in child penalties. Parental leave expansions between 1979 and 1992 ampliï¬ ed child penalties and contributed nearly one-third to the increase in child-related gender inequality. Instead, a parental beneï¬ t reform in 2007 mitigated further increases. While the third set of results highlights the role of family policies, the ï¬ rst two imply that sidelining mothers becomes increasingly costly over time.