The Evolution of Child-Related Gender Inequality in Germany and The Role of Family Policies, 1960-2018

Using German administrative data from the 1960s onward, this paper (i) examines the long-term evolution of child-related gender inequality in earnings and (ii) assesses the impact of family policies on this inequality. Our first (methodological) contribution is a decomposition approach that separates changes in child-related inequality into three components: the share of mothers, child penalties, and potential earnings of mothers (absent children). Our second contribution is a comprehensive analysis of child-related gender inequality in Germany. We derive three sets of findings. First, child penalties (i.e., the share of potential earnings mothers lose due to children) have increased strongly over the last decades. Mothers who had their first child in the 1960s faced much smaller penalties than those who gave birth in the 2000s. Second, the fraction of overall gender inequality in earnings attributed to children rose from 14% to 64% over our sample period. We show that this trend resulted not only from growing child penalties but also from rising potential earnings of mothers. Intuitively, in later decades, mothers had more income to lose from child-related career breaks. Third, we show that parental leave expansions between 1979 and 1992 amplified child penalties and explain nearly a third of the increase in child-related gender inequality. By contrast, a parental benefit reform in 2007 mitigated further increases.