Can Financial Incentives Reduce the Baby Gap? Evidence from a Reform in Maternity Leave Benefits

55 Pages Posted: 9 Oct 2017

Date Written: October 2017

Abstract

To assess whether earnings-dependent maternity leave positively impacts fertility and narrows the baby gap between high educated (high earning) and low educated (low earning) women, I exploit a major maternity leave benefit reform in Germany that considerably increases the financial incentives for higher educated and higher earning women to have a child. In particular, I use the large differential changes in maternity leave benefits across education and income groups to estimate the effects on fertility up to 5 years post reform. In addition to demonstrating an up to 22% increase in the fertility of tertiary educated versus low 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 education and income distributions. Overall, the results suggest that earnings-dependent maternity leave benefits, which compensate women commensurate with their opportunity cost of childbearing, could successfully reduce the fertility rate disparity related to mothers' education and earnings.

Keywords: Fertility, fertility gaps, paid maternity leave

JEL Classification: J13, J16, J18

Suggested Citation

Raute, Anna, Can Financial Incentives Reduce the Baby Gap? Evidence from a Reform in Maternity Leave Benefits (October 2017). CEPR Discussion Paper No. DP12350, Available at SSRN: https://ssrn.com/abstract=3049906

Anna Raute (Contact Author)

University of Mannheim ( email )

Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany

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