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, PhDProfessor

Parents in the labour market

March 18, 2009Economics of the Family

Helena Skyt Nielsen, Aarhus University

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, PhDProfessor

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)

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, PhDProfessor

The effect of parenthood on wages Simonsen and Skipper (2006)

Data Use a 5%-sample of the Danish population Select 20-40 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

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, PhDProfessor

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

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, PhDProfessor

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, PhDProfessor

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?

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, PhDProfessor

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.

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, PhDProfessor

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…

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, PhDProfessor

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, PhDProfessor

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, PhDProfessor

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

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, PhDProfessor

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

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, PhDProfessor

What drives the family-gap?

Methodology Endogenous switching model

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, PhDProfessor

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

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, PhDProfessor

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, PhDProfessor

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, PhDProfessor

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, PhDProfessor

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)

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, PhDProfessor

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…

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, PhDProfessor

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, PhDProfessor

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, PhDProfessor

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 2001. 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

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, PhDProfessor

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, PhDProfessor

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, PhDProfessor

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, PhDProfessor

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?

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, PhDProfessor

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