The Intergenerational Effects of Parental Leave: Exploiting Forty Years of U.S. Policy Variation

We study the effects of job-protected leave policies on intergenerational mobility, long-run child outcomes, and parental decisions (labor market, investments in children, and fertility). We merge rich sources of historical information on family leave policies across the United States since 1973 with over 40 years of survey data covering two generations of individuals. Exploiting variation in the timing of job-protected leave policies introduced in a large set of 18 states and the District of Columbia before the enactment of the Family and Medical Leave Act (FMLA) in 1993, we find that the pre-FMLA protected leave policies had a level effect and a mobility effect. The level effect yields from overall improvements in education and wages for the children born under these policies. The mobility effect, chiefly an increase in intergenerational mobility in education, stems from heterogeneity in the effects of the policies: children of mothers with fewer years of education benefit more. As a potential mechanism, we find that the policies increased mothers’ time investments in children and the likelihood of the households having childcare expenses. Finally, consistent with the tradeoffs of policy design, we find that the policies exacerbated the motherhood penalty in labor market outcomes and that they affected fertility choices, increasing the likelihood of having a first child and decreasing the likelihood of having subsequent children.