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A general equilibrium analysis of parental leave policies

Author

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  • Andrés Erosa

    () (IMDEA Ciencias Sociales)

  • Luisa Fuster

    () (IMDEA Ciencias Sociales)

  • Diego Restuccia

    () (University of Toronto)

Abstract

Despite mandatory parental-leave policies being a prevalent feature of labor markets in developed countries, the aggregate effects of leave policies are not well understood. In order to assess the quantitative impact of mandated leave policies in the economy, we develop ageneral-equilibrium model of fertility and labor-market decisions that builds on the labormarket framework of Mortensen and Pissarides (1994). We find that females gain substantially with generous policies, but this benefit occurs at the expense of a reduction in the welfare of males. Mandated leave policies have important effects on fertility, leave taking decisions, and employment rate of mothers with infants. These effects are driven by how policy affects bargaining in job matches: Young females anticipate that there are some states in the future in which their threat point in bargaining will be higher. Because the realization of these states depend on the decisions of females to give birth and take a leave, the change in the threat point induced by the policy subsidizes fertility and leave taking. Unpaid parental leaves have a small impact on the time that mothers spend with their children but paid parental leaves can be an effective tool to encourage mothers to spend time with theirchildren after giving birth.

Suggested Citation

  • Andrés Erosa & Luisa Fuster & Diego Restuccia, 2009. "A general equilibrium analysis of parental leave policies," Working Papers 2009-10, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  • Handle: RePEc:imd:wpaper:wp2009-10
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    References listed on IDEAS

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    Cited by:

    1. Doepke, M. & Tertilt, M., 2016. "Families in Macroeconomics," Handbook of Macroeconomics, Elsevier.
    2. Nezih Guner & Ezgi Kaya & Virginia Sánchez-Marcos, 2014. "Gender gaps in Spain: policies and outcomes over the last three decades," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 5(1), pages 61-103, March.
    3. Eva Garcia-Moran & Zoe Kuehn, 2012. "With Strings Attached: Grandparent-Provided Child care, Fertility, and Female Labor Market Outcomes," CEPRA working paper 1202, USI Università della Svizzera italiana.
    4. Erosa, Andres & Fuster, Luisa & Restuccia, Diego, 2016. "A quantitative theory of the gender gap in wages," European Economic Review, Elsevier, vol. 85(C), pages 165-187.
    5. Andres Erosa & Luisa Fuster & Diego Restuccia, 2010. "A General Equilibrium Analysis of Parental Leave Policies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(4), pages 742-758, October.
    6. García-Morán, Eva & Kuehn, Zoe, 2012. "With strings attached: Grandparent-provided child care, fertility, and female labor market outcomes," MPRA Paper 37001, University Library of Munich, Germany.
    7. Reich, Nora, 2008. "Das Bundeselterngeld- und Elternzeitgesetz in Deutschland: Analyse potenzieller Effekte auf Geburtenzahl und Fertilitätsstruktur," HWWI Policy Papers 1-10, Hamburg Institute of International Economics (HWWI).
    8. Larry E. Jones & Alice Schoonbroodt & Michèle Tertilt, 2010. "Fertility Theories: Can They Explain the Negative Fertility-Income Relationship?," NBER Chapters,in: Demography and the Economy, pages 43-100 National Bureau of Economic Research, Inc.
    9. repec:bla:ecorec:v:94:y:2018:i:304:p:80-100 is not listed on IDEAS
    10. Raquel Bernal & Anna Fruttero, 2008. "Parental leave policies, intra-household time allocations and children’s human capital," Journal of Population Economics, Springer;European Society for Population Economics, vol. 21(4), pages 779-825, October.
    11. Guner, Nezih & Kaygusuz, Remzi & Ventura, Gustavo, 2013. "Childcare Subsidies and Household Labor Supply," CEPR Discussion Papers 9775, C.E.P.R. Discussion Papers.
    12. Flabbi, Luca & Mabli, James, 2012. "Household Search or Individual Search: Does It Matter? Evidence from Lifetime Inequality Estimates," IZA Discussion Papers 6908, Institute for the Study of Labor (IZA).
    13. Hamish Low & Virginia Sánchez-Marcos, 2015. "Female labour market outcomes and the impact of maternity leave policies," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-22, December.
    14. Eva Garcia-Moran & Zoe Kuehn, 2017. "With Strings Attached: Grandparent-Provided Child Care and Female Labor Market Outcomes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 23, pages 80-98, January.
    15. Eva Garcia-Moran & Zoe Kuehn, 2017. "With Strings Attached: Grandparent-Provided Child Care and Female Labor Market Outcomes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 23, pages 80-98, January.
    16. Del Rey, Elena & Racionero, Maria & Silva, Jose I., 2017. "On the effect of parental leave duration on unemployment and wages," Economics Letters, Elsevier, vol. 158(C), pages 14-17.
    17. Elizabeth M. Caucutt & Nezih Guner & John Knowles, 2001. "The Timing of Births: A Marriage Market Analysis," Penn CARESS Working Papers 49355d43c11f2314075e8b54e, Penn Economics Department.
    18. García-Morán, Eva & Kuehn, Zoe, 2013. "With strings attached: Grandparent-provided child care and female labor market outcomes," MPRA Paper 48953, University Library of Munich, Germany.
    19. repec:pal:easeco:v:44:y:2018:i:3:d:10.1057_s41302-017-0099-9 is not listed on IDEAS
    20. Bick, Alexander, 2011. "The quantitative role of child care for female labor force participation and fertility," MPRA Paper 31713, University Library of Munich, Germany.

    More about this item

    Keywords

    human capital; labor-market equilibrium; parental-leave policies; fertility; temporary separations;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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