Pension Wealth and Maternal Employment: Evidence from a Reform of the German Child Care Pension Benefit

49 Pages Posted: 20 Aug 2015

See all articles by Andreas Thiemann

Andreas Thiemann

German Institute for Economic Research (DIW Berlin)

Date Written: August 2015

Abstract

This paper uses administrative data to investigate how a change in pension wealth affects a mother’s employment decision after child birth. I exploit the extension of the child care pension benefit in 1992 as a natural experiment in a regression discontinuity design to estimate short- and medium-run employment effects. In comparison to most family benefits, the child care pension benefit is accumulated upon child birth but only becomes effective on the verge of retirement. Hence, the employment response depends on how a mother discounts future pension benefits. The results suggest that the change in pension wealth does not affect maternal employment, which is not in line with a forward looking rational behavior. Therefore, the child care pension benefit increases maternal old-age income without causing negative employment reactions.

Keywords: Natural experiment, female labor supply, pension benefit

JEL Classification: J13, H55, D19

Suggested Citation

Thiemann, Andreas, Pension Wealth and Maternal Employment: Evidence from a Reform of the German Child Care Pension Benefit (August 2015). DIW Berlin Discussion Paper No. 1499, Available at SSRN: https://ssrn.com/abstract=2647245 or http://dx.doi.org/10.2139/ssrn.2647245

Andreas Thiemann (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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