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 Parents in the labour market March 18, 2009 Economics of the Family 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 Outline (1) Tour through this field of research  The effect of parenthood on wages  Skipper and Simonsen (2006)  The effect of leave-taking on wages  Albrecht et al. (1999)  What drives the family-gap for women?  Nielsen, Verner and Simonsen (2004)  Family-friendly policies to reduce the family-gap  Datta Gupta, Verner and Smith (2008)  Simonsen (2008)  Nielsen (2009) (2) More details about  Causes and consequences of fathers’ child leave  Nielsen (2009)

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 effect of parenthood on wages  Simonsen and Skipper (2006)  Data  Use a 5%-sample of the Danish population  Select year-old men and women  Methodology: propensity score matching  Main Assumptions  CIA - Conditional independence  (distr.of outcome had he/she not had children=non-parent w/ same obs.char.)  P<1 – ’Common support’  (prob to have a child<1)  Result  Average treatment effect on the treated  An estimate of the net effect of parenthood  …. incl the effect of childbearing on leave-taking, occupation 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 The effect of parenthood on wages  The propensity score should include variables influencing  Wages  Selection into parenthood  The propensity score depends on  Age  Detailed education categories  Education of the parents (in particular the mother)  The propensity score predicts parenthood quite well

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 The effect of parenthood on wages  Result  Mothers earn 7.4% less than non-mothers  Fathers earn 6.0% more than non-fathers  Interpretation  Mothers (!)  …take long spells of leave in connection with child birth  …spend more time per day in home production  Fathers (?)  …providers work more? Work harder? Specialize in market work?  …providers have better outside opportunities?

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 effect of leave-taking on wages  Albrecht et al. (1999)  Swedish data is well suited  Month-by-month event histories -> distinguish time out by reason  Parental leave -> both men and women take leave in Sweden  Coupled with employer reported wages  Data  Survey based information about cohorts 1949,54,59,64,69  Information about 1600 women/600 men as of 1991/92.

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 effect of leave-taking on wages  Albrecht et al. (1999)  Hypothesis: A negative effect of leave-taking is not only explained by skill depreciation, if  … different types of time out of work have different effects  … effects vary by gender  Methodology  Cross section estimation  Panel data estimations (to correct for omitted variable bias)  Results  The percentage reduction in wages as a consequence of X months of time out for reason Y  Coefficient estimates for the parameters of main interest…

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 The effect of leave-taking on wages  Results  Cross section  Different types of leave have different effects  Effects vary by gender  Panel data  Effects vary by gender  Interpretation  Consistent with a signaling game  Men – separating equilibrium  Women – pooling equilibrium

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 What drives the family-gap?  Nielsen, Simonsen, and Verner (2004)  Data  Like Simonsen and Skipper (2006)  Hypotheses  The family-gap is larger in the non family-friendly sector than in the family-friendly sector  Women who expect to have children self-select into the family-friendly sector to avoid the penalty

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 What drives the family-gap?  Methodology  Endogenous switching model

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 What drives the family-gap?  Channels  Experience foregone  actual experience, actual experience squared  Child penalty  mother dummy (plus interactions w/education)  Human capital depreciation  Duration of leave  Catch-up  Indicator variables for time since last birth-related 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

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 What drives the family-gap?  Conclusion  Family-friendly policies drive the family-gap  Temporary family-gap in the public sector  Permanent family-gap in the private sector (not realised)  Who self-selects into the family-friendly sector?  Selection on observables (into the public sector)  Women who plan to become mothers  Women who would have been penalised much from having children in the private sector (may change sector later!)  Selection on unobservables  Postive selection  Sector choice based on comparative advantages  If the sector selection is ignored, the estimated family-gap is biased (overestimated)

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 Family-friendly policies to reduce the family-gap  Datta-Gupta, Verner and Smith (2008)  Nordic countries’ family-friendly policies  creates a ’system-based glass ceiling’  no evidence of trade-off between child/family welfare and long leave  Family-friendly policies  Long maternity leave periods  High compensation rates  Job protection  Subsidized child care  Consequences  Positive effects  High LFP of women  Negative ’boomerang effects’  Stagnation of the gender wage gap (widening at the top of the distribution)  Gender segregation  More detailed empirical analyses…

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 Family-friendly policies to reduce the family-gap  Simonsen (2008)  Purpose  Analyze the effect of  price of high quality daycare  guaranteed access to daycare  On female employment 5-15 months after birth  Data  10% of Danish women, year  Income > ceiling for meanstesting of child care subsidy  Methodology  Estimation of employment probits month 5,6,..15  Identification relies on variation in price and availability of child care across municipalities  Conclusion  Price and availability of daycare affects employment after birth

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

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 Family-friendly policies to reduce the family-gap  Ekberg, Eriksson and Friebel (2005)  Daddy month  => fathers take two more weeks of leave on average  => mothers return 3-4 weeks faster to work  Advantage  Stronger incentive/force fathers to take leave if the household wants a leave period of a certain lenght  Disadvantage  Difficult to implement w/o increasing the total leave period  Nielsen (2009)  Economic incentives  => fathers take more leave  Advantage  Costless for the state as the total eligibility needs not change  Long-run social costs are ambiguous  Pos?: Children? Female careers? Gender equality gains? Work organization?  Neg?: Men vs. Women out of work? Intrahousehold welfare effects?

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 Conclusion  Mothers loose and fathers gain from parenthood  Fathers are penalized more for child leave than mothers  Optimal design of family-friendly policies  Child care  -> important for short run employment (return to work)  Duration of leave  -> important for long run employment and career  Economic incentives  -> important for leave-sharing