How Do Firms Respond to Parental Leave Absences?

Abstract

How do firms adjust their labor demand when a female employee takes temporary leave after childbirth? Using Austrian administrative data, we compare firms with and without a birth event and exploit policy reforms that significantly altered leave durations. We find that (i) firms adjust hiring, employment, and wages around leave periods, but these effects fade quickly; (ii) adjustments differ sharply by gender, reflecting strong gender segregation within firms; (iii) longer leave entitlements extend actual leave absences but have only short-term effects; and (iv) there is no impact on firm closure up to five years after birth.

Keywords: absence duration, gender, labor demand, labor supply, firms, family leave

JEL Classification: H2, H5, J2, J08, J13