The effect of own and spousal parental leave on earnings

This paper investigates the effect of parental leave – both own and spousal – on subsequent earnings using different sources of variation. Using fixed-effect models, and in line with previous results, parental leave is found to decrease each parent’s future earn-ings. Also spousal leave is important, but only for mothers. In fact, each month the father stays on parental leave has a larger positive effect on maternal earnings than a similar reduction in the mother’s own leave. Using two reforms of the parental leave system as exogenous sources of variation yields only imprecisely estimated effects, even though the reforms had a strong effect on parental leave usage. However, the point estimates tentatively suggest effects in the same range or larger than the fixed-effects model foundKeywords: Treatment evaluation, equilibrium effects, matching estimators