Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Causes and consequences of fathers’ child leave: Evidence from a reform of leave schemes Spring 2009 Very preliminary Helena Skyt Nielsen, Aarhus University

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Outline  Previous studies  The reform  Identification strategy  Data  Empirical analysis  Conclusion

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Previous studies  Individual eligibility to leave increases fathers’ usage of child leave  Sweden - Ekberg, Eriksson and Friebel (2005)  US - Han, Ruhm and Waldfogel (2009)  Father’s leave hurts his own career  Sweden - Albrecht et al. (1999), Stafford and Sundström (1996), Bygren and Duvander (2006)  This evidence is mainly suggestive  Father’s leave improves his partner’s career  Sweden - Ekberg, Eriksson and Friebel (2005)  Sweden - Pylkkänen and Smith (2003)  This evidence concerns short-run outcomes

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Previous studies  Fathers’ usage of parental leave may influence his children  US - Nepomnyaschy and Waldfogel (2007)  Positive effect on short run outcomes: feeding, dressing, bathing, getting up at night  Causal effect?  Sweden - Ekberg, Eriksson and Friebel (2005)  No effect on long run outcomes: care of sick children  More generally, fathers’ usage of parental leave may influcence  Gender equality, gender wage gap, workplace organization, etc.

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t This study  Research questions:  Does economic incentives induce fathers to use parental leave schemes?  How much extra monetary compensation is needed to induce the couple to transfer one day of leave from the mother to the father?  Does a father’s usage of parental leave influence his own career and his wife’s career?

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t The reform  New legislation - ”flexible child leave scheme”  Implemented for children born after March 27, 2002  Content  It extended the period with full benefit compensation  From weeks  To weeks  It introduced flexibility in the following ways  Leave may be shared flexibly between partners and over time  Leave may be used simultaneously by both parents

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t The reform  New interpretation of collective agreements  as a consequence of the reform  The mother has a right to wage compensation   The father has a right to wage compensation   Conditional on the fact that the employer receives a reimbursement  Reimbursement is now available for weeks (rather than weeks)

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t The reform  I focus on the public sector  Two collective agreements Local vs. State  Maximum available favorable terms and conditions  100% uncapped wage compensation for a long period of time  Consequence of the reform  Parents covered by different collective agreements obtain an extra 10 weeks of 100% wage compensation if they both use 10 weeks of parental leave  Illustration…

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Illustration of the child leave regulations before the reform  Mother Father

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Illustration of the child leave regulations after the reform – spouses on same wage agreement Father Mother

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Illustration of the child leave regulations after the reform – spouses on different wage agreements MotherFather

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Identification strategy  Estimation of the causal effect of economic incentives on leave taking  Diff-in-diff  Estimation of the causal effect of father’s leave on career outcome  IV

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Identification strategy  Identifying assumption  Common trend assumption  Time-varying variables: preference for leave, business cycle effects, etc.  Issues to consider  Selection into treatment  The scheme is complicated – Olsen (2007) states that parents, employers and local authorities lacked information  Delayed response  The effect of the ”intention to treat”

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Data  Population of Danish individuals  Combined with complete fertility and leave histories  Select all births in where…  … the mother and father can be identified and form a couple  … the mother and father are aged 20 to 50 years  … the mother and father completed higher education (short, medium or long cycle higher education)  … the mother and father are publicly employed

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Table 1. Sample selection.

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Table 2. Descriptive statistics.

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Table 2. Continued.

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Figure 5. Trends in child leave. 

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Table 3. Transition matrices.

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Empirical Analysis The effect of economic incentives  on father’s leave taking  on mother’s leave taking The effect of father’s leave usage  on mother’s career  on father’s career

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Table 4. Estimation of the effect of economic incentives on fathers’ leave taking

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Table 5. Estimation of the effect of economic incentives on mothers’ leave taking

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Table 6. Estimation of the effect of economic incentives on fathers’ usage of parental leave

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Results – fathers’ leave usage  The effect of economic incentives inducing fathers to take leave is positive and large  The positive effect tends to be driven by  Fathers having their first or second child  Fathers employed in local municipalities  Long cycle higher education  In particular Social Sciences.  But also Medium cycle higher education (Pedagogue/Teacher)

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Results – mothers’ leave usage  The effect of economic incentives inducing fathers to take leave is negative and large  The negative effect tends to be driven by  Mothers having their third or higher ranked child  Mothers employed in state, but also mothers employed in the local municipalities/counties  Long cycle higher education  In particular: Social Sciences and Natural and Technical Sciences  But also Medium cycle higher education (Pedagogues/Teachers)

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Results – validity  Validity of the common trends assumption  Education controls -> OK  First child -> OK  Sector as of year 2001 (pre-reform) -> OK  Look at data before > not OK  Fake reforms  2000 (using pre-reform data only) -> No effect -> OK  2004 (using post-reform data only) -> Positive effect! -> not OK  Analyse delayed response, disregard data from year

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Table 7. Estimation of the effect of …… assuming a delayed response

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Results – the effect of economic incentives in monetary terms  Main specification  Include  Post*CompensationGain  Post*CompensationGainSqr  Quadratic form, peak at 14.4 days/DKK 1190  Gross income:  For every DKK 82.6 ($11.8) increased wage compensation for transferring a day of leave from the mother to the father  => fathers supply one extra day of child care  Net income:  For every DKK 37.2 ($5.3) increased wage compensation for transferring a day of leave from the mother to the father  => fathers supply one extra day of child care  Elasticity of child care supply =.3  Delayed response  Elasticity of child care supply =.43

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Approach - career  Career outomes  Wage increase DKK, year 1 after birth  Wage increase DKK, year 2 after birth  Wage increase pct, year 1 after birth  Wage increase pct, year 2 after birth  Promotion, year 1 after birth  Promotion, year 2 after birth  Ln wages, year 2006  Career outcome regressed on father’s leave  OLS, probit, IV:

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Approach - career  IV strategies  1) Ideal approach  Post*Different as instrument  Validity: OK  Strength: OK? (t~3-4)  2) Another approach  Post, Different,Post*Different as instruments  Strength: OK (due to Post)  Validity: ?  Identifying assumptions:  Conditional on year dummies, ’Post’ doesnot influence the career outcome  Conditional on the individuals’ and the partners’ education, ’Different’ does not influence the career outcome  3) Alternative approach  Indicators for the couple’s education cell as instruments  Strength: OK  Validity: ?  Identifying assumptions:  Conditional on the individuals’ and the partners’ education, the couples’s exact education cell does not influence career variable

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Table 8. Estimation of the effect of father’s parental leave on his partner’s career

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Table 9. Estimation of the effect of father’s parental leave on his own career

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Results - careers  Father’s leave usage  Improves his partner’s career  Measured by: wage increase in DKK, in pct, log wage in 2006, promotion.  Causal effect for wages, not for promotion  Hurts his own career (as expected due to depreciation)  Measured by: wage increase in DKK, in pct, log wage in 2006, promotion.  Unclear whether it is a causal effect  Maybe a causal effect for wages, not for promotion

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Preliminary conclusion  Economic incentives affect fathers’ leave usage:  Increased compensation increases fathers’ leave taking  The effect is large:  The couple transfers one more day on average when they gain $5 per day from the father’s parental leave usage (until a max of 14.4 days)  Policy conclusion  Unions and employers confederation are on the rigth track in Denmark by giving individual eligibility to paid parental leave….

Helena Skyt Nielsen, PhD Professor A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t Preliminary conclusion  There is an effect of fathers’ child leave on the careers  The mother’s career is positively affected by the father’s leave taking  Seems to be a causal relationship at least for wages but not for promotion  The father’s career is negatively affected  Unclear whether it is a causal effect, maybe causal for wages not promotion