Effects of Parental Leave Policies on Female Career and Fertility Choices

Abstract

This paper constructs and estimates a dynamic discrete choice structural model of labor supply, occupational choice, and fertility in the presence of parental leave legislation. The estimated structural model is used for an ex ante evaluation of parental leave expansions that change the duration of job protection and/or the replacement rate of the cash benefit. Counterfactual simulation results indicate that a one-year job protection significantly increased maternal employment and earnings, but extending it from one to three years and offering cash benefits have little effect. Overall, parental leave policies have little effect on fertility. I also find that policy effects are stronger for younger cohorts who observe a policy change several years before childbearing, because they adjust their career paths accordingly as soon as the policy change.