Paid Leave Pays Off: The Effects of Paid Family Leave on Firm Performance

74 Pages Posted: 22 Nov 2019 Last revised: 15 Nov 2022

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Benjamin Bennett

Tulane University - A.B. Freeman School of Business

Isil Erel

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Léa H. Stern

University of Washington - Michael G. Foster School of Business

Zexi Wang

Lancaster University

Multiple version iconThere are 2 versions of this paper

Date Written: November 14, 2022

Abstract

Using the staggered adoption of US state-level Paid Family Leave (PFL) acts, we find that lowering labor market frictions for female workers leads to reduced employee turnover and profitability gains for private and publicly-traded firms. Relying on recent advances in econometric theory of staggered difference-in-differences analysis, we ensure this finding holds when correcting for the bias arising from staggered adoption. Following the introduction of state-level PFL, productivity increases by about 5% in treated establishments, relative to control establishments in adjacent counties on the other side of the state border. We document heterogeneous treatment effects consistent with our identity-based framework.

Keywords: Paid Family Leave, Labor Force Participation, Gender, Diversity, Talent Allocation, Firm Performance

JEL Classification: J16, J22, J24, J32, J78, M14, M51

Suggested Citation

Bennett, Benjamin and Erel, Isil and Stern, Lea H. and Wang, Zexi, Paid Leave Pays Off: The Effects of Paid Family Leave on Firm Performance (November 14, 2022). Fisher College of Business Working Paper No. 2019-03-029, Charles A. Dice Center Working Paper No. 2019-29, European Corporate Governance Institute – Finance Working Paper No. 643/2019, Available at SSRN: https://ssrn.com/abstract=3490645 or http://dx.doi.org/10.2139/ssrn.3490645

Benjamin Bennett (Contact Author)

Tulane University - A.B. Freeman School of Business ( email )

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HOME PAGE: https://sites.google.com/site/benjaminbennettfinance/home

Isil Erel

Ohio State University (OSU) - Department of Finance ( email )

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National Bureau of Economic Research (NBER) ( email )

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Lea H. Stern

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Zexi Wang

Lancaster University ( email )

Lancaster University Management School
Bailrigg
Lancaster, LA1 4YX
United Kingdom

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