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Vortrag
Labor Supply of Mothers with Young Children: Validating a Structural Model Using a Natural Experiment

Johannes Geyer, Peter Haan, Katharina Wrohlich


IZA Workshop Recent Advances in Labor Supply Modeling
Dublin, Irland, 17.05.2012 - 19.05.2012


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Abstract:
In this paper we estimate an intertemporal structural model of labor supply for mothers with young children. In order to validate the structural model, we make use of a recently introduced parental leave reform in Germany. We compare the behavioral predictions of the structural model under the reform (out-of-sample fit) to results based on an evaluation where we exploit the parental leave reform as a natural experiment. Based on both methods we find that due to the new parental leave scheme, that pays higher benefits for a shorter period of time, labor supply of mothers in the first year after giving birth declines, however increases in the second year. Further, we find the strongest effects for low-income mothers, who have a significantly higher probability to return to work two years after giving birth than under the old parental leave scheme. Overall our findings support a policy evaluation based on the structural model since despite the imposed structural assumptions the model can replicate the causal effect of a real policy reform.

Abstract

In this paper we estimate an intertemporal structural model of labor supply for mothers with young children. In order to validate the structural model, we make use of a recently introduced parental leave reform in Germany. We compare the behavioral predictions of the structural model under the reform (out-of-sample fit) to results based on an evaluation where we exploit the parental leave reform as a natural experiment. Based on both methods we find that due to the new parental leave scheme, that pays higher benefits for a shorter period of time, labor supply of mothers in the first year after giving birth declines, however increases in the second year. Further, we find the strongest effects for low-income mothers, who have a significantly higher probability to return to work two years after giving birth than under the old parental leave scheme. Overall our findings support a policy evaluation based on the structural model since despite the imposed structural assumptions the model can replicate the causal effect of a real policy reform.

Johannes Geyer

Stellvertretender Abteilungsleiter in der Abteilung Staat

Peter Haan

Abteilungsleiter in der Abteilung Staat

Katharina Wrohlich

Leiterin in der Forschungsgruppe Gender Economics



JEL-Classification: J22;H31;C52
Keywords: labor supply, parental leave, structural model, natural experiment
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