Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2009:5: Female labor supply and parental leave benefits – the causal effect of paying higher transfers for a shorter period of time

Annette Bergemann () and Regina T. Riphahn ()
Additional contact information
Annette Bergemann: VU University Amsterdam, Department of Economics, Postal: De Boelelaan 1105 , 1081 HV Amsterdam , The Netherlands
Regina T. Riphahn: University of Erlangen-Nuremberg, Postal: Lange Gasse 20 , D-90403 Nürnberg , Germany

Abstract: We study the labor supply effects of a major change in child-subsidy policy in Germany in 2007 designed to both increase fertility and shorten birth-related employment interruptions. The reform involved a move from a means-tested maternity leave benefit system that paid a maximum of 300 Euro for up to two years to an income dependent benefit system that replaced two third of the pre-birth income for at most one year. As the reform took place very recently, we estimate the labor supply effect by using data drawn from the German Socio-Economic Panel on the intention of women to return to the labor market; notably whether women are likely to return and whether they intend to return quickly. Our results show that the reform yields most of the intended effects: The fraction of mothers who responded that they were going to return to the labor market within a year since the interview increased by 14 percentage points.

Keywords: Female labor supply; fertility; child subsidy; parents money

JEL-codes: J13; J21

10 pages, February 19, 2009

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