The Intergenerational Effects of Parental Leave: Exploiting Forty Years of U.S. Policy Variation

 Abstract: While job-protected leave (JPL) is part of the family policy strategies of all developed nations, its marginal contribution to policy objectives is not well understood.

Combining over four decades of survey data with JPL policy variation in 18 U.S. states, we present the first assessment of the impact of leave policies on intergenerational mobility on education and earnings, and we also study other effects of the policy in both generations, parents and children. JPL policies increased intergenerational mobility in education and improved children’s long-term educational outcomes and wages. The mobility gains follow from stronger effects on children from mothers with fewer years of education. Additionally, JPL policies increased the motherhood penalty, increased housework activities such as caregiving for children, increased the likelihood of childcare expenses,

Life-Cycle Fertility, Human Capital, and Family Polices: A Discrete-Continuous Choice Framework*

Abstract: We combine vast quasi-experimental variation in leave and tax-transfer policies in the US between 1968-2017 with a dynamic, discrete-continuous choice framework to study how these policies affect women’s labor market decisions and outcomes, fertility decisions, and tax revenue. Crucially, we incorporate the trade-off between leisure, work, and child-rearing time, and integrate the multiple dimensions of leave policies (work requirements, length, job-protection, reimbursement) and tax-transfer policies (welfare transfers, family allowances, marginal tax rate, progressivity, marriage benefits). We show identification and develop a corresponding three-stage estimation strategy that combines the policy variation with a long panel of individual data. The variation in policy over time and across states is key to our identification, estimation, and counterfactual evaluation of the national implementation of policies. Our results reveal a policy tradeoff between policies that best foster fertility (family allowances) and those that best foster labor market outcomes (leave policies). However, the opposing effects of these policies on fertility and labor market outcomes can be balanced while increasing tax revenue.