Short-run fertility effects of parental leave benefits: evidence from a structural model
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Short-run fertility effects of parental leave benefits: evidence from a structural model Holger Stichnoth1 Received: 19 February 2015 / Accepted: 23 January 2019 © Springer-Verlag GmbH Germany, part of Springer Nature 2019
Abstract Based on a structural model of fertility and female labour force supply with unobserved heterogeneity and state dependence, we evaluate the 2007 reform of parental leave benefits in Germany, which replaced a flat, means-tested benefit by a generous earnings-related transfer. The model predicts a short-term fertility effect of about 4%, which is consistent with recent quasi-experimental evidence. The fertility effect is strongest for first births and increases with income. We use the model for a number of counterfactual policy experiments in which we vary the generosity of parental leave benefits. Keywords Fertility · Female labour supply · Family policy · Parental leave · Latent-class models · State dependence JEL classification C25 · C53 · J13 · J22
Funding by the Deutsche Forschungsgemeinschaft (DFG), Project Number 264753967, is gratefully acknowledged. The paper builds on a project financed by the German Federal Ministry of Finance (BMF) and the Federal Ministry of Family Affairs, Senior Citizens, Women and Youth (BMFSFJ). The views expressed in the paper are those of the author and not necessarily those of the two ministries. Raphael Abiry, Holger Bonin, Karsten Reuss (all at ZEW Mannheim) as well as Christina Boll, Nora Reich, Christina B. Wilke (all at HWWI Hamburg), Marc-André Nehrkorn-Ludwig, Reinhold Schnabel (both at the University of Duisburg-Essen), Irene Gerlach, Inga Laß (both at FFP Münster) and Karsten Hank (University of Cologne) participated in the overall project and provided valuable input into the development of the present model. The manuscript benefitted from comments by François Laisney and from discussions with seminar participants at ZEW Mannheim, NIW Hannover, the Institute for Fiscal Studies (London) and ISER/University of Essex, workshop participants at the ZEW Workshop on Family Economics (November 2013), the ZEW Workshop on Family Policy in Germany (February 2014) and the 4th Workshop “Arbeitsmarkt und Sozialpolitik” at ifo Dresden.
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Holger Stichnoth [email protected] ZEW – Leibniz Centre for European Economic Research, P. O. Box 103443, 68034 Mannheim, Germany
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H. Stichnoth
1 Introduction Almost all OECD countries have a system of paid parental leave in place. During parental leave, parents are guaranteed their pre-birth jobs and typically receive some kind of financial support. Countries differ in the duration of parental leave and the level and design of benefit payments (Thévenon and Solaz 2013). In 2007, Germany, which had long been a classic example of a “male breadwinner” model, took many observers by surprise and reformed its parental leave regulations to bring them closer to the “Nordic model”. By shortening the entitlement period from 24 to 12 months (14 months if both parents go on parental leave for at least two months), the
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