Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics

Abstract: Parental leave mandates are associated with high female employment rates, but with reductions in

relative female wages if leave is of extended duration. We analyze the impact of family policies

(parental leave and childcare prices) of Denmark and Sweden on women’s career breaks due to

childbirth. These countries are culturally similar and share the same type of welfare state ideology,

but differ remarkably in pursued family policies. Our analysis takes advantage of the availability

of comparable longitudinal data and allows us to estimate parallel models across the two

countries. The impact of family policies and economic incentives on the probability of returning

to the labor market is estimated using a duration model approach. Our results show that

economic incentives affect the behavior of mothers in both countries. However, the parental

leave mandates as such are very important determinants for the observed behavior. Based on

policy simulations we find that if fathers were given more parental leave, it would promote the

labor supply of women.

Keywords: Maternal Leave; Parental Leave; Childcare; Family Policy; Mothers’ Labor Supply

JEL-codes: J10; J22

43 pages, May 26, 2004

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