Anti-discrimination Legislation and the Efficiency-Enhancing Role of Mandatory Parental Leave

Spencer Bastani, Tomer Blumkin and Luca Micheletto

No 5917, CESifo Working Paper Series from CESifo

Abstract: We study a setting where anti-discrimination legislation gives rise to adverse selection in the labor market. Firms rely on nonlinear compensation contracts to screen workers who differ in their family/career orientation. This results in a labor market equilibrium where career-oriented workers are offered an inefficiently low duration of parental leave. In addition, family-oriented workers are offered lower wages as compared to their equally skilled career-oriented counterparts. We demonstrate the usefulness of mandatory parental leave rules in mitigating the distortion in the labor market and derive conditions under which a Pareto improvement is possible. We also characterize the optimal parental leave policy and highlight the possibility for parental leave legislation to eliminate the wage penalty of family-oriented workers by supporting pooling employment contracts.

Keywords: anti-discrimination; adverse selection; parental leave; efficiency (search for similar items in EconPapers)
JEL-codes: D82 H21 J31 J83 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Anti-discrimination Legislation and the Efficiency-Enhancing Role of Mandatory Parental Leave (2016)
Working Paper: Anti-discrimination Legislation and the Efficiency-Enhancing Role of Mandatory Parental Leave (2016)
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