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Employer vs Government Parental Leave: Labour Market Effects

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  • Elena Del Rey
  • Maria Racionero
  • Jose I. Silva

Abstract

WA relatively large number of firms in Australia and in the US offer employer-funded parental leave to their employees beyond legal requirements. We introduce government-funded parental leave in a theoretical labour search and matching model. Firms choose the duration of paid parental leave offered to prospective employees. Matched firms and workers then negotiate wages through a Nash bargaining process. In equilibrium, the wage and the labour market tightness are determined by the point at which the wage and job creation curves intercept. We study the reasons behind the presence of employer-funded parental leave and its effects on wages and employment. We also explore the labour market and welfare effects of the introduction and extension of government-funded parental leave.

Suggested Citation

  • Elena Del Rey & Maria Racionero & Jose I. Silva, 2023. "Employer vs Government Parental Leave: Labour Market Effects," ANU Working Papers in Economics and Econometrics 2023-692, Australian National University, College of Business and Economics, School of Economics.
    • Handle: RePEc:acb:cbeeco:2023-692
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    References listed on IDEAS

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    More about this item

    Keywords

    Employer-funded paid parental leave; wages; unemployment;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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