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

Spencer Bastani (), Tomer Blumkin and Luca Micheletto

No 88, Working Papers from "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi

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)
Date: 2016-05
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Working Paper: Anti-discrimination Legislation and the Efficiency-Enhancing Role of Mandatory Parental Leave (2016) Downloads
Working Paper: Anti-discrimination Legislation and the Efficiency-Enhancing Role of Mandatory Parental Leave (2016) Downloads
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