Mind the employment gap: an impact evaluation of the Czech “multi-speed” parental benefit reform

Parental leave is a key policy tool for addressing work-life reconciliation issues inherent to parenthood, including maternal employment and its continuity. The 2004 Czech accession to the EU shed light on the scope of the employment gap between women with and without children at pre-school age, highest among all the OECD countries (41 pp). This is due to very long universal paid parental leave: 4 years per child. In order to tackle this gap and to conform to the EU trend, a major reform was designed in 2008, and this paper investigates its effects on mothers' participation and employment. I use the Labour Force Survey to assess the effect of this reform on maternal employment and activity levels, thanks to a difference-in-differences identification strategy. The reform provided an extensive change in financial incentives in favour of shorter leaves, and I show that effects on return-to-work timing are large and significant. However, if mothers do respond to the incentive by advancing the timing of the return to work by one year, the eligibility restrictions as well as the public childcare shortage narrow - de facto - the scope of the effect, which merely compensates for the massive opposite trend induced in the 1990s.