Parental leave, norms and wages

One objective of the Swedish parental leave policy has been to encourage greater equality between mothers and fathers in time spent caring for their newborn. The introduction of “daddy months” was explicitly done with this objective in mind. This project focuses on the effect of the introduction of the second daddy month in 2002. Following parents who had their first child in a four-year period before the reform as well as those whose first child was born in a four-year period after the reform, we observe that fathers increased their parental leave uptake by more than the extra month that was directly incentivised by the policy change. The objective of the project is to better understand the parental leave patterns that we observe in the data.

To this end, we build a model of household decision making in which the new mother and father jointly decide how much leave each parent will take. There are several factors involved. First, there is a direct incentive associated with the policy – a father (say) who fails to take his daddy months is “leaving money on the table”. Second, there may be wage penalties associated with “excessive” parental leave, especially for fathers. Finally, there may be “norms effects”. A father may be more comfortable spending time on the playground with his child if other fathers are doing the same and, similarly, a mother may be more comfortable with an early return to work if other mothers are also coming back. We estimate the model structurally, and also use our model to investigate the potential effects of policies such as those in Iceland and Finland.