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What Is the Case for Paid Maternity Leave?

Listed author(s):
  • Gordon B. Dahl
  • Katrine V. Løken
  • Magne Mogstad
  • Kari Vea Salvanes

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 number 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 labor 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 significant 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 is regressive in the sense that eligible mothers have higher family incomes compared to ineligible mothers or childless individuals. Within the group of eligibles, the program also pays higher amounts to mothers in wealthier families. 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 findings suggest the generous extensions to paid leave were costly, had no measurable effect on outcomes and regressive 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.

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File URL: http://www.nber.org/papers/w19595.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19595.

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Date of creation: Oct 2013
Publication status: published as "What is the Case for Paid Maternity Leave?" (with Katrine Løken, University of Bergen, Magne Mogstad, University of Chicago, and Kari Vea Salvanes, University of Oslo), Review of Economics and Statistics, forthcoming.
Handle: RePEc:nbr:nberwo:19595
Note: CH LS PE
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  1. Guido Imbens & Thomas Lemieux, 2007. "Regression Discontinuity Designs: A Guide to Practice," NBER Working Papers 13039, National Bureau of Economic Research, Inc.
  2. Mari Rege & Ingeborg F. Solli, 2010. "The Impact of Paternity Leave on Long-term Father Involvement," CESifo Working Paper Series 3130, CESifo Group Munich.
  3. 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.
  4. 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.
  5. Ruhm, Christopher J., 2000. "Parental leave and child health," Journal of Health Economics, Elsevier, vol. 19(6), pages 931-960, November.
  6. Dahl, Gordon B. & Løken, Katrine V. & Mogstad, Magne, 2012. "Peer Effects In Program Participation," Working Papers in Economics 12/12, University of Bergen, Department of Economics.
  7. Richard Blundell & Michael Graber & Magne Mogstad, 2014. "Labor income dynamics and the insurance from taxes, transfers and the family," IFS Working Papers W14/01, Institute for Fiscal Studies.
  8. 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.
  9. Sakiko Tanaka, 2005. "Parental leave and child health across OECD countries," Economic Journal, Royal Economic Society, vol. 115(501), pages 7-28, 02.
  10. David S. Lee & Thomas Lemieux, 2009. "Regression Discontinuity Designs in Economics," NBER Working Papers 14723, National Bureau of Economic Research, Inc.
  11. Stacy Dickert-Conlin & Amitabh Chandra, 1999. "Taxes and the Timing of Birth," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 161-177, February.
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