Who Cares? Parental Leave Benefits and Household Division of Childcare
Grant Type
Early Career Research Award
Publication Date
3-30-2026
Description
Gender gaps in earnings and career advancement remain a central challenge in modern labor markets, largely driven by the unequal impact of parenthood on men’s and women’s careers. While a large literature has examined how parental-leave duration and non-transferable “daddy quotas” affect parents’ labor market outcomes—generally finding limited effects on child penalties—much less is known about how the monetary generosity of parental-leave benefits shapes the allocation of childcare and market work within households. Yet benefit replacement rates are a core policy parameter in paid-leave systems, which are now widespread across most OECD countries and increasingly adopted by U.S. states, and feature prominently in current policy debates. This project studies how parental-leave benefit generosity affects the division of parental leave within households and parents’ long-run earnings trajectories. Using newly available administrative data from Germany covering the universe of parental-leave recipients since 2014, the analysis exploits quasi-experimental variation in benefit amounts generated by a kink in the benefit formula, implemented through a regression kink design. Preliminary evidence shows that households respond to financial incentives through substitution in parental inputs: in particular, lower replacement rates for mothers reduce maternal leave duration, increase fathers’ leave-taking, and strengthen mothers’ labor market attachment, without affecting total household leave. The funded research will extend this analysis to long-run earnings and employment outcomes using administrative tax records and assess the implications of alternative benefit designs for gender gaps, household welfare, and public finances. By providing new causal evidence on how parental-leave benefit generosity shapes labor market outcomes within households, this project offers policy-relevant guidance for the design of paid parental-leave systems.