Fertility , female labour supply , family policy , parental leave , latent class models , state dependence
Abstract:
Based on a structural model of fertility and female labour force supply with
unobserved heterogeneity and state dependence, we evaluate the 2007 reform of
parental leave benefits in Germany, which replaced a flat, means-tested benefit
by a generous earnings-related transfer. The model predicts a short-term fertility
effect of about 4%, which is consistent with recent quasi-experimental evidence.
The fertility effect is strongest for first births and increases with income. We use
the model for a number of counterfactual policy experiments in which we vary the
generosity of parental leave benefits.
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