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What Is the Case for Paid Maternity Leave?

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  • B. Dahl, Gordon

    () (Department of Economics, University of California San Diego)

  • V. Løken, Katrine

    () (Department of Economics, University of Bergen)

  • Mogstad, Magne

    () (Department of Economics, University College London & Research Department, Statistics Norway)

  • Vea Salvanes, Kari

    () (Department of Economics, University of Oslo)

Abstract

Paid maternity leave has gained greater salience in the past few decades as mothers have increasingly entered the workforce. Indeed, the median number of weeks of paid leave to mothers among OECD countries was 14 in 1980, but had risen to 42 by 2011. We assess the case for paid maternity leave, focusing on parents' responses to a series of policy reforms in Norway which expanded paid leave from 18 to 35 weeks (without changing the length of job protection). Our first empirical result is that none of the reforms seem to crowd out unpaid leave. Each reform increases the amount of time spent at home versus work by roughly the increased numb er of weeks allowed. Since income replacement was 100% for most women, the reforms caused an increase in mother's time spent at home after birth, without a reduction in family income. Our second set of empirical results reveals the expansions had little effect on a wide variety of outcomes, including children's school outcomes, parental earnings and participation in the lab or market in the short or long run, completed fertility, marriage or divorce. Not only is there no evidence that each expansion in isolation had economically signicant effects, but this null result holds even if we cumulate our estimates across all expansions from 18 to 35 weeks. Our third finding is that paid maternity leave has negative redistribution properties. The program makes regressive transfers both from ineligibles to eligibles and within the group of eligible mothers. Since there was no crowd out of unpaid leave, the extra leave benefits amounted to a pure leisure transfer, primarily to middle and upper income families. Finally, we investigate the financial costs of the extensions in paid maternity leave. We find these reforms had little impact on parents' future tax payments and benefit receipt. As a result, the large increases in public spending on maternity leave imply a considerable increase in taxes, at a cost to economic efficiency. Taken together, our finding suggest the generous extensions to paid leave were costly, had no measurable effect on outcomes and poor redistribution properties. In a time of harsh budget realities, our findings have important implications for countries that are considering future expansions or contractions in the duration of paid leave.

Suggested Citation

  • B. Dahl, Gordon & V. Løken, Katrine & Mogstad, Magne & Vea Salvanes, Kari, 2013. "What Is the Case for Paid Maternity Leave?," Working Papers in Economics 09/13, University of Bergen, Department of Economics.
  • Handle: RePEc:hhs:bergec:2013_009
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    References listed on IDEAS

    as
    1. Yoshio Higuchi & Jane Waldfogel & Masahiro Abe, 1999. "Family leave policies and women's retention after childbirth: Evidence from the United States, Britain, and Japan," Journal of Population Economics, Springer;European Society for Population Economics, vol. 12(4), pages 523-545.
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    3. Blundell, Richard & Graber, Michael & Mogstad, Magne, 2015. "Labor income dynamics and the insurance from taxes, transfers, and the family," Journal of Public Economics, Elsevier, vol. 127(C), pages 58-73.
    4. Ruhm, Christopher J., 2000. "Parental leave and child health," Journal of Health Economics, Elsevier, vol. 19(6), pages 931-960, November.
    5. Rafael Lalive & Josef Zweimüller, 2009. "How Does Parental Leave Affect Fertility and Return to Work? Evidence from Two Natural Experiments," The Quarterly Journal of Economics, Oxford University Press, vol. 124(3), pages 1363-1402.
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    8. Michael Baker & Kevin Milligan, 2008. "How Does Job-Protected Maternity Leave Affect Mothers' Employment?," Journal of Labor Economics, University of Chicago Press, vol. 26(4), pages 655-691, October.
    9. Mari Rege & Ingeborg F. Solli, 2010. "The Impact of Paternity Leave on Long-term Father Involvement," CESifo Working Paper Series 3130, CESifo Group Munich.
    10. Tarjei Havnes & Magne Mogstad, 2011. "No Child Left Behind: Subsidized Child Care and Children's Long-Run Outcomes," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 97-129, May.
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    12. Sakiko Tanaka, 2005. "Parental leave and child health across OECD countries," Economic Journal, Royal Economic Society, vol. 115(501), pages 7-28, February.
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    More about this item

    Keywords

    Paid maternity leave; redistribution effects of social programs;

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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