Department of Economics

Mixed effects of parental leave benefits

The Scandinavian countries offer the world’s most generous parental leave benefits. These policies aim both at helping mothers in the labor market, and at promoting infant well-being. But does it work?

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Rita Ginja, Associate Professor at the Department of Economics, studies this question in a paper forthcoming in the Journal of Labor Economics, co-authored with Jenny Jans and Arizo Karimi.

A typical challenge to researchers in this field is that comparisons of groups with high and low benefits are not “apples-to-apples,” and therefore fail to reveal the true policy effect. Ginja circumvents this issue by exploiting a peculiarity of the Swedish system for granting paid maternity leave. Her approach identifies the causal effect of higher parental leave benefits on several key family outcomes.

“We have three main empirical findings,” says Ginja. “First, higher benefits causes mothers to work less. Second, when high-income mothers get higher benefits, their partners work more. Third, the first-born child of mothers with increased benefits do better at school.’’

So does it work? Ginja sees her study as having a mixed message for policy makers:

“On one hand, higher benefits have positive long-run impacts on children, although not on the second child, which was the intended beneficiary of the policy in our study. On the other hand, higher benefits creates more inequality within households, by widening both the male/female earnings gap, and the so-called birth order penalty.’’