Parental Leave Benefits and Gender Inequality: Evidence from a Benefits Cap for High-Earning Mothers
Abstract
Abstract I use the universe of tax returns in Germany and a regression kink design to estimate the impacts of mothers’ parental leave benefit amounts on within-couple earnings inequality. I make use of a benefits cap to estimate the causal impacts for high-earning women: a group for which earnings inequality is particularly large. A lower mother's benefit amount results in a reduced gender gap in earnings that persists beyond the benefit period for at least nine years after the birth. The longer-term impacts are driven by couples where the mother earned more than her partner pre-birth. Simulations suggest that a 10% reduction in the benefit amount could reduce long-run child penalties in sample couples from 63% to 46%.