‘The Economic Consequences of Parental Leave Mandates: Lessons from Europe Christopher J. Ruhm, The Quarterly Journal of Economies, Vol. 113, No. 1 (Feb., 1998), 285-317, Stable URL: bhtp:flinks,jstor-org/sici?sici~0033-5533%2§ 199802%29 1 13%3A1%3C285%3ATECOPL%3E2.0.CO%3B2-Q ‘The Quarterly Journal of Economics is currently published by The MIT Press. ‘Your use of the ISTOR archive indicates your acceptance of ISTOR’s Terms and Conditions of Use, available at htp:sseww jstor org/aboutiterms.html. ISTOR’s Terms and Conditions of Use provides, in part, that unless you hhave obtained prior permission, you may aot download an entie issue of a journal or multiple copies of articles, and ‘you may use content in the ISTOR archive only for your personal, non-commercial use Please contact the publisher eegarding aay futher use ofthis work, Publisher contact information ray he abained at itp jor onaiournalsmitaesshe. Each copy of any part ofa JSTOR transenission must contain the same copyright tice that appears on the screen or printed page of such transtnission, ISTOR isan independent not-for-profit organization dedicated to creating and preserving a digital archive ot scholarly journals. For more information regarding ISTOR, please contact suppom@jstor org. hup:thrwwjstor orgy ‘Mon Oct 17 17:15:09 2005‘THE ECONOMIC CONSEQUENCES OF PARENTAL LEAVE MANDATES; LESSONS FROM EUROPE* Cnnistorier J. Rune "This study investigates the ecomgese consequences of vights to paid parental leave in nine European. countries aver the 1969 through 1995 period. Since women tase virtually ll parental leave in most nations, men oonsttute a reasonable ‘omparlacn graop, and mast ofthe analysis examines how changes in patd leave ‘affect the gop between female and male labor marezentenmes. The employment- torpopelations ratios of women in their prime childbearing years are also ‘compared with those of corresponding aged men and older females. Parental leave Is ascoclatod with Increases In women's employment, but with reductiana in thele relative wagas at extended durations ‘Over 100 countries have enacted some form of parental leave policies, with most assuring at least two to three months of paid Job absences [Kamerman 1991]. Nevertheless, the effects of providing rights to time off work in the period surrounding childbirth remain poorly understood. Proponents believe that parental leave results in healthier children and improves the position of women in the workplace, Opponents counter that. the mandates, by restricting voluntary exchange hetween workers and employers, reduce economic efficiency and may have a particularly adverse effect on women. ‘The results af previous research an parental leave are ambigu- ous. Some U. S. studies suggest that time off work is associated with increases in employment and wages (Dalta 1989; Spalter- Roth and Hartmann 1990; Waldfogel 1994, 1997). However, since these analyses cover a period when most leaves were voluntarily provided by employers, rather than being required by law, the differences in labor market status may result from nonrandom selection into jabs providing the benefit, and the evidence is difficult ta interpret. Other researchers have attempted to over- came the selection problem by examining legislated parental eave benefits. Klerman and Leibowitz [1997] uncover mixed "Thave henefited greatly from my discoasions with Jackqueline Teague an the history of Europesn Sarental leave policies. 1 woud like to, than David Blau, Anrew Brod, Bruce Meyer Slaphen Hlachin, Kenneth Snowden, daze Waidogel, ‘cd workshop parileipants athe. Center for European Revhomia Reessteh, Norehwestarn Uniecrsty, Princeton University, University af Narts Carcling Chapel HLll, University af North Cavelina Greensbar, University of Wisconsta, ‘Society of Lebo Eoonomics Meetings, and Ameriean Béonemie Association Mest- ings for helpfl commons on eavllervevatans of cia mandzcrit 1008 by he Presiden and Feast Haran Calle ‘Tecnology. Te Quarry Jura Reonamiee, Eabssry 1986 od tha Mesnachutetng Traviata of286 QUARTERLY JOURNAL OF ECONOMICS employment effects of maternity leave mandates instituted by some states during the late 1980s, Waldfogel (1996] finds that recently enacted federal legislation in the United States had little effect on wages, while modestly increasing employment; but this last result. is sensitive to the model estimated. The ambiguous results of these studies may reflect the limited ecope of the federal and state mandates or inadequacies of the data. Finally, Ruhm and Teague [1997], using information for seventeen nations, show that short to moderate entitlements to parental leave are posi- tively related to per capita incomes, employment-to-population ratios GBP ratios), and labor force participation rates. However, there is little indication of stronger effects for women than for men, raising concern that the direction of causation may be misidentified, ‘This study investigates the labor market consequences of rights to paid parental leave using data for nine European countries aver the 1969 through 1993 period.+ The dependent variables are EP ratios and hourly wages? Since women use virtually all parental leave in most: countries, men constitute reasonable comparison group, and the “natural” experiment, examines how changes in leave entitlements affect the gap between female and male outcomes Limited analysis is also undertaken using 26-34 year old women as the treatment: group and corresponding men or females aged 45-84 as the eomparisan group. The younger wamen are in their prime childbearing years and so should be strongly affected by leave mandates. Time and country effects are controlled for throughout the analysis to provide “difference-in-difference-in-difference” (DDD) estimates. Country-specific time trends are frequently included to capture the effects of group-specific factors that vary aver time within countries, European date are particularly useful for investigating the effects of parental leave, All Western European countries cur- 1, A distingion is sometimes made between "maternity leave.” which is ranted. tm matiers for a limited period sround the time of ehudbire=, ana ental late. hich pelts aauonal ie of work te ara fr iain oF sung dren Bath erefnluded in the defiition af arena eave ose belo ‘Aa earlier vorsion of this Peper also ineludad woaily wore hols a 2% outcome there os te indlcaloy of Srna paral lave fat and the Tesules were sensitive to the specification chosen, ofcbably pariy becatise see ‘heeifie Sats on wae hours wera unavailable tar many equrteis 3, Gruber [1984] and Waldfogel (1396) have sim larly used men as a compari pw extuiing the feck of mondeted maersiy henahta 22d ve legisation nthe United Slates pare