Parental Leave, Worker Substitutability, and Firm’s Employment

64 Pages Posted: 16 Feb 2022 Last revised: 2 Jun 2022

See all articles by Mathias Huebener

Mathias Huebener

German Institute for Economic Research (DIW Berlin)

Jonas Jessen

German Institute for Economic Research (DIW Berlin); European University Viadrina

Daniel Kühnle

University of Duisburg-Essen

Michael Oberfichtner

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Multiple version iconThere are 2 versions of this paper

Date Written: May 31, 2022

Abstract

Motherhood and parental leave are important sources of worker absences and employment interruptions in firms, yet we know little about their effects on firms. Based on linked employer-employee data from Germany, we examine how firms handle such absences and how more generous leave benefits affect firm-level employment and hirings decisions. Focusing on small- and medium-sized firms, three key findings emerge: First, when firms have few internal substitutes available, they hire more external replacements and mothers take shorter leave. Second, more generous benefits reduce firm-level employment in the short term, which is driven by firms with few internal substitutes. Third, firms do not respond to more generous benefits by hiring fewer young women, even when they have few internal substitutes. Negative effects of parental leave and its extension are thus concentrated in firms with few internal replacements, though a leave extension does not affect the composition of new hirings.

Keywords: Parental leave, worker absences, worker substitutability

JEL Classification: J16, J18, J24

Suggested Citation

Huebener, Mathias and Jessen, Jonas and Kühnle, Daniel and Oberfichtner, Michael, Parental Leave, Worker Substitutability, and Firm’s Employment (May 31, 2022). Available at SSRN: https://ssrn.com/abstract=4032803 or http://dx.doi.org/10.2139/ssrn.4032803

Mathias Huebener

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

Mohrenstraße 58
Berlin, 10117
Germany

Jonas Jessen (Contact Author)

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

Mohrenstr
58
Berlin
Germany

European University Viadrina ( email )

Germany

Daniel Kühnle

University of Duisburg-Essen

Lotharstrasse 1
Duisburg, 47048
Germany

Michael Oberfichtner

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Schloßplatz 4
Erlangen, DE 91054
Germany

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