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Does Parental Leave Affect Fertility and Return-to-Work? Evidence from a "True Natural Experiment"

Author

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  • Lalive, Rafael

    () (University of Lausanne)

  • Zweimüller, Josef

    () (University of Zurich)

Abstract

We study the causal effects of changes in parental leave provisions on fertility and return-to-work behavior. We exploit a policy change that took place in 1990 in Austria which extended the maximum duration of parental leave from the child's first to the child's second birthday. As parental leave benefits can be automatically renewed when a new mother is still on leave from a previous child, this created a strong incentive to "bunch" the time off work in case of multiple planned children and/or to increase fertility. We study the quantitative effect of this incentive using an empirical strategy which resembles a true experimental set-up very closely. In particular, assignment to treatment is random and treated and controls face (almost) identical environmental conditions. We find that treated mothers have a 4.9 percentage points (or 15 percent) higher probability to get an additional child within the following three years; and a 3.9 percentage points higher probability in the following ten years. This suggests that not only the timing but also the number of children were affected by the policy change. We also find that parental leave rules have a strong effect on mothers' return-to-work behavior. Per additional months of maximum parental leave duration, mothers' time off work is reduced by 0.4 to 0.5 months. The effects of a subsequent policy change in 1996 when maximum parental leave duration was reduced from the child’s second birthday to the date when the child became 18 months old brought about no change in fertility behavior, but a labor supply effect that is comparable in magnitude to the one generated by the 1990 policy change. This can be rationalized by the incentives created through automatic benefit renewal.

Suggested Citation

  • Lalive, Rafael & Zweimüller, Josef, 2005. "Does Parental Leave Affect Fertility and Return-to-Work? Evidence from a "True Natural Experiment"," IZA Discussion Papers 1613, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1613
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    References listed on IDEAS

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    1. repec:taf:rjapxx:v:20:y:2015:i:4:p:613-629 is not listed on IDEAS
    2. Rasmussen, Astrid Würtz, 2010. "Increasing the length of parents' birth-related leave: The effect on children's long-term educational outcomes," Labour Economics, Elsevier, vol. 17(1), pages 91-100, January.
    3. Spiess, C.Katharina & Wrohlich, Katharina, 2008. "The Parental Leave Benefit Reform in Germany: Costs and Labour Market Outcomes of Moving towards the Nordic Model," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 575-591.
    4. Emilia Del Bono & Andrea Weber & Rudolf Winter-Ebmer, 2012. "Clash Of Career And Family: Fertility Decisions After Job Displacement," Journal of the European Economic Association, European Economic Association, vol. 10(4), pages 659-683, August.
    5. REINSTADLER Anne, 2011. "Luxembourg and France: Comparable Family Benefits, Comparable Fertility Levels?," LISER Working Paper Series 2011-65, LISER.
    6. Blome, Agnes, 2011. "Work/care policies in European welfare states: Continuing variety or change towards a common model?," Discussion Papers, Research Professorship Demographic Development, Social Change, and Social Capital SP I 2011-401, Social Science Research Center Berlin (WZB).
    7. Liu Qian & Skans Oskar Nordstrom, 2010. "The Duration of Paid Parental Leave and Children's Scholastic Performance," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-35, January.
    8. Herwig Immervoll & David Barber, 2005. "Can Parents Afford to Work?: Childcare Costs, Tax-Benefit Policies and Work Incentives," OECD Social, Employment and Migration Working Papers 31, OECD Publishing.
    9. Anna Cristina D’Addio & Simon Chapple & Andreas Hoherz & Bert Van Landeghem, 2014. "Using a quasi-natural experiment to identify the effects of birth-related leave policies on subjective well-being in Europe," OECD Journal: Economic Studies, OECD Publishing, vol. 2013(1), pages 235-268.
    10. Kasey S. Buckles & Elizabeth L. Munnich, 2012. "Birth Spacing and Sibling Outcomes," Journal of Human Resources, University of Wisconsin Press, vol. 47(3), pages 613-642.

    More about this item

    Keywords

    parental leave; fertility; pro-natalist policy; family and work obligations; return to work; labor supply;

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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