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Can financial incentives reduce the baby gap? Evidence from a reform in maternity leave benefits

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  • Anna Raute

    (Queen Mary University of London)

Abstract

In this paper, I assess whether earnings-dependent maternity leave positively impacts fertility and narrows the baby gap between highly educated (high-earning) and less-educated (low-earning) women. I exploit a major maternity leave benefit reform in Germany that considerably increased the financial incentives, by up to 21,000 EUR, for highly educated and higher-earning women. Using the large differential changes in maternity leave benefits across education and income groups in a differences-in-differences design, I estimate the causal impact of the reform on fertility for up to 5 years. In addition to demonstrating an up to 23% increase in the fertility of tertiary-educated women, I find a positive, statistically significant effect of increased benefits on fertility, driven mainly by women at the middle and upper end of the earnings distribution. Overall, the results suggest that earnings-dependent maternity leave benefits, which compensate women according to their opportunity cost of childbearing, could successfully reduce the fertility rate disparity related to mothers’ education and earnings.

Suggested Citation

  • Anna Raute, 2018. "Can financial incentives reduce the baby gap? Evidence from a reform in maternity leave benefits," Working Papers 871, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:871
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    File URL: https://www.qmul.ac.uk/sef/media/econ/research/workingpapers/2018/wp871.pdf
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    Cited by:

    1. Doepke, Matthias & Hannusch, Anne & Kindermann, Fabian & Tertilt, Michèle, 2022. "The Economics of Fertility: A New Era," IZA Discussion Papers 15224, Institute of Labor Economics (IZA).
    2. Tamm, Marcus, 2018. "Fathers' Parental Leave-Taking, Childcare Involvement and Mothers' Labor Market Participation," IZA Discussion Papers 11873, Institute of Labor Economics (IZA).
    3. Malte Sandner & Frederik Wiynck, 2023. "The Fertility Response to Cutting Child-Related Welfare Benefits," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 42(2), pages 1-29, April.

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    More about this item

    Keywords

    Fertility; fertility gaps; paid maternity leave; opportunity cost;
    All these keywords.

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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