1. Februar 2017

Cluster-Seminar Öffentliche Finanzen und Lebenslagen

Paid parental leave and child development: Evidence from the 2007 German parental benefit reform and administrative data


1. Februar 2017
12:30 - 13:30


DIW Berlin im Quartier 110
Room 5.2.010
Mohrenstraße 58
10117 Berlin


Mathias Huebener

This paper examines the effects of a substantial change in publicly funded paid parental leave in Germany on child development and socio-economic development gaps at age 6. For children born before January 1, 2007, parental leave benefits were means-tested and paid for up to 24 months after childbirth.  Thereafter, parental leave benefits were earnings-related and only paid for up to 14 months. Higher-income households benefited more from the reform than low-income households. We study the reform effects on children's language skills, motor skills, socio-emotional stability, and school readiness using administrative data from mandatory school entrance examinations. To estimate causal reform effects on child development, we use a difference-in-differences design which exploits the eligibility rule based on children's birthdate. We find no impact of the reform on child development and socio-economic development gaps. The effects are precisely estimated and robust to various model specifications and sample definitions. Our results suggest that  such substantial changes in parental leave benefits are unlikely to have a substantial impact on children's development.