Can financial incentives reduce the baby gap? Evidence from a reform in maternity leave benefits

Anna Raute

No 12350, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: To assess whether earnings-dependent maternity leave positively impacts fertility and narrows the baby gap between high educated (high earning) and low educated (low earning) women, I exploit a major maternity leave benefit reform in Germany that considerably increases the financial incentives for higher educated and higher earning women to have a child. In particular, I use the large differential changes in maternity leave benefits across education and income groups to estimate the effects on fertility up to 5 years post reform. In addition to demonstrating an up to 22% increase in the fertility of tertiary educated versus low educated women, I find a positive, statistically significant effect of increased benefits on fertility, driven mainly by women at the middle and upper end of the education and income distributions. Overall, the results suggest that earnings-dependent maternity leave benefits, which compensate women commensurate with their opportunity cost of childbearing, could successfully reduce the fertility rate disparity related to mothers’ education and earnings.

Keywords: Fertility; Fertility gaps; Paid maternity leave (search for similar items in EconPapers)
JEL-codes: J13 J16 J18 (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-dem, nep-edu and nep-eur
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Citations: View citations in EconPapers (36)

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Working Paper: Can Financial Incentives Reduce the Baby Gap? Evidence from a Reform in Maternity Leave Benefits (2017)
Working Paper: Can Financial Incentives Reduce the Baby Gap? Evidence from a Reform in Maternity Leave Benefits (2017)
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