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Reconciling Estimates of the Long-Term Earnings Effect of Fertility

Author

Listed:
  • Simon Bensnes
  • Ingrid Huitfeldt
  • Edwin Leuven

Abstract

This paper reconciles different approaches to estimating the labor market effects of children. Combining elements from event-study and instrumental-variable estimators we find that while both approaches imply a 15 percent increase in the mother-partner earnings gap ("child penalty"), they differ in what drives this gap. The standard event study attributes it primarily to reduced maternal earnings, but our results suggest maternal changes account for less than half. We show that women time fertility as their earnings profile flattens, causing the event study to overestimate the maternal penalty. This finding has broader implications for event-study designs, as pre-trends may be uninformative about selection bias.

Suggested Citation

  • Simon Bensnes & Ingrid Huitfeldt & Edwin Leuven, 2026. "Reconciling Estimates of the Long-Term Earnings Effect of Fertility," RFBerlin Discussion Paper Series 26043, ROCKWOOL Foundation Berlin (RFBerlin).
    • Handle: RePEc:crm:wpaper:26043
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    Keywords

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    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • 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
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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