The Introduction of a Short-Term Earnings-Related Parental Leave Benefit System and Differential Effects on Employment Intentions

Abstract

German family policy underwent a reform in 2007, when the new instrument of “Elterngeld” replaced “Erziehungsgeld.” The two programs differ in various respects. We studied the intended effects on the labor supply of young mothers by comparing these women’s employment intentions before and after the reform. We conducted separate investigations of high- and low-income women, who were treated differently under the old “Erziehungsgeld” regime, and we distinguished between the period of benefit receipt and the period after the benefits ran out. Our results mainly confirm expectations based on a labor supply model.