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Causes and consequences of fathers’ child leave: Evidence from a reform of leave schemes

Causes and consequences of fathers’ child leave: Evidence from a reform of leave schemes. Spring 2009 Very preliminary Helena Skyt Nielsen, Aarhus University. Outline. Previous studies The reform Identification strategy Data Empirical analysis Conclusion. Previous studies.

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Causes and consequences of fathers’ child leave: Evidence from a reform of leave schemes

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  1. Causes and consequences of fathers’ child leave: Evidence from a reform of leave schemes Spring 2009 Very preliminary 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

  2. 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

  3. 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

  4. Outline • Previous studies • The reform • Identification strategy • Data • Empirical analysis • Conclusion 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

  5. Previous studies • Individual eligibility to leave increases fathers’ usage of child leave • Sweden - Ekberg, Eriksson and Friebel (2005) • US - Han, Ruhm and Waldfogel (2009) • Father’s leave hurts his own career • Sweden - Albrecht et al. (1999), Stafford and Sundström (1996), Bygren and Duvander (2006) • This evidence is mainly suggestive • Father’s leave improves his partner’s career • Sweden - Ekberg, Eriksson and Friebel (2005) • Sweden - Pylkkänen and Smith (2003) • This evidence concerns short-run outcomes 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

  6. Previous studies • Fathers’ usage of parental leave may influence his children • US - Nepomnyaschy and Waldfogel (2007) • Positive effect on short run outcomes: feeding, dressing, bathing, getting up at night • Causal effect? • Sweden - Ekberg, Eriksson and Friebel (2005) • No effect on long run outcomes: care of sick children • More generally, fathers’ usage of parental leave may influcence • Gender equality, gender wage gap, workplace organization, 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

  7. This study • Research questions: • Does economic incentives induce fathers to use parental leave schemes? • How much extra monetary compensation is needed to induce the couple to transfer one day of leave from the mother to the father? • Does a father’s usage of parental leave influence his own career and his wife’s career? 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

  8. The reform • New legislation - ”flexible child leave scheme” • Implemented for children born after March 27, 2002 • Content • It extended the period with full benefit compensation • From 4+14 + 2+2+10 weeks • To 4+14 + 2+ 32 weeks • It introduced flexibility in the following ways • Leave may be shared flexibly between partners and over time • Leave may be used simultaneously by both parents 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

  9. The reform • New interpretation of collective agreements • as a consequence of the reform • The mother has a right to wage compensation • 4+14 +10 • The father has a right to wage compensation • 2+2+10 • Conditional on the fact that the employer receives a reimbursement • Reimbursement is now available for 4+14+2+32 weeks (rather than 4+14+2+2+10 weeks) 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

  10. The reform • I focus on the public sector • Two collective agreements Local vs. State • Maximum available favorable terms and conditions • 100% uncapped wage compensation for a long period of time • Consequence of the reform • Parents covered by different collective agreements obtain an extra 10 weeks of 100% wage compensation if they both use 10 weeks of parental leave • Illustration… 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

  11. Illustration of the child leave regulations before the reform Mother Father 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

  12. Illustration of the child leave regulations after the reform – spouses on same wage agreement Father Mother 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

  13. Illustration of the child leave regulations after the reform – spouses on different wage agreements Mother Father 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

  14. Identification strategy • Estimation of the causal effect of economic incentives on leave taking • Diff-in-diff • Estimation of the causal effect of father’s leave on career outcome • IV 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

  15. Identification strategy • Identifying assumption • Common trend assumption • Time-varying variables: preference for leave, business cycle effects, etc. • Issues to consider • Selection into treatment • The scheme is complicated – Olsen (2007) states that parents, employers and local authorities lacked information • Delayed response • The effect of the ”intention to treat” 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

  16. Data • Population of Danish individuals 1980-2006 • Combined with complete fertility and leave histories • Select all births in 1997-2005 where… • … the mother and father can be identified and form a couple • … the mother and father are aged 20 to 50 years • … the mother and father completed higher education (short, medium or long cycle higher education) • … the mother and father are publicly employed 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

  17. Table 1. Sample selection. 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

  18. 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

  19. Table 2. Descriptive statistics. 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

  20. Table 2. Continued. 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

  21. Figure 5. Trends in child 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

  22. Table 3. Transition matrices. 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

  23. Empirical Analysis The effect of economic incentives • on father’s leave taking • on mother’s leave taking The effect of father’s leave usage • on mother’s career • on father’s career 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

  24. Table 4. Estimation of the effect of economic incentives on fathers’ leave taking 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

  25. Table 5. Estimation of the effect of economic incentives on mothers’ leave taking 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

  26. Table 6. Estimation of the effect of economic incentives on fathers’ usage of parental 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

  27. Results – fathers’ leave usage • The effect of economic incentives inducing fathers to take leave is positive and large • The positive effect tends to be driven by • Fathers having their first or second child • Fathers employed in local municipalities • Long cycle higher education • In particular Social Sciences. • But also Medium cycle higher education (Pedagogue/Teacher) 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

  28. Results – mothers’ leave usage • The effect of economic incentives inducing fathers to take leave is negative and large • The negative effect tends to be driven by • Mothers having their third or higher ranked child • Mothers employed in state, but also mothers employed in the local municipalities/counties • Long cycle higher education • In particular: Social Sciences and Natural and Technical Sciences • But also Medium cycle higher education (Pedagogues/Teachers) 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

  29. Results – validity • Validity of the common trends assumption • Education controls -> OK • First child -> OK • Sector as of year 2001 (pre-reform) -> OK • Look at data before 2004 -> not OK • Fake reforms • 2000 (using pre-reform data only) -> No effect -> OK • 2004 (using post-reform data only) -> Positive effect! -> not OK • Analyse delayed response, disregard data from year 2002+2003 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

  30. Table 7. Estimation of the effect of …… assuming a delayed response 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

  31. Results – the effect of economic incentives in monetary terms • Main specification • Include • Post*CompensationGain • Post*CompensationGainSqr • Quadratic form, peak at 14.4 days/DKK 1190 • Gross income: • For every DKK 82.6 ($11.8) increased wage compensation for transferring a day of leave from the mother to the father • => fathers supply one extra day of child care • Net income: • For every DKK 37.2 ($5.3) increased wage compensation for transferring a day of leave from the mother to the father • => fathers supply one extra day of child care • Elasticity of child care supply = .3 • Delayed response • Elasticity of child care supply = .43 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

  32. Approach - career • Career outomes • Wage increase DKK, year 1 after birth • Wage increase DKK, year 2 after birth • Wage increase pct, year 1 after birth • Wage increase pct, year 2 after birth • Promotion, year 1 after birth • Promotion, year 2 after birth • Ln wages, year 2006 • Career outcome regressed on father’s leave • OLS, probit, IV: 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

  33. Approach - career • IV strategies • 1) Ideal approach • Post*Different as instrument • Validity: OK • Strength: OK? (t~3-4) • 2) Another approach • Post, Different,Post*Different as instruments • Strength: OK (due to Post) • Validity: ? • Identifying assumptions: • Conditional on year dummies, ’Post’ doesnot influence the career outcome • Conditional on the individuals’ and the partners’ education, ’Different’ does not influence the career outcome • 3) Alternative approach • Indicators for the couple’s education cell as instruments • Strength: OK • Validity: ? • Identifying assumptions: • Conditional on the individuals’ and the partners’ education, the couples’s exact education cell does not influence career variable 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

  34. Table 8. Estimation of the effect of father’s parental leave on his partner’s career 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

  35. Table 9. Estimation of the effect of father’s parental leave on his own career 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

  36. Results - careers • Father’s leave usage • Improves his partner’s career • Measured by: wage increase in DKK, in pct, log wage in 2006, promotion. • Causal effect for wages, not for promotion • Hurts his own career (as expected due to depreciation) • Measured by: wage increase in DKK, in pct, log wage in 2006, promotion. • Unclear whether it is a causal effect • Maybe a causal effect for wages, not for promotion 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

  37. Preliminary conclusion • Economic incentives affect fathers’ leave usage: • Increased compensation increases fathers’ leave taking • The effect is large: • The couple transfers one more day on average when they gain $5 per day from the father’s parental leave usage (until a max of 14.4 days) • Policy conclusion • Unions and employers confederation are on the rigth track in Denmark by giving individual eligibility to paid parental 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

  38. Preliminary conclusion • There is an effect of fathers’ child leave on the careers • The mother’s career is positively affected by the father’s leave taking • Seems to be a causal relationship at least for wages but not for promotion • The father’s career is negatively affected • Unclear whether it is a causal effect, maybe causal for wages not promotion 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

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