“Is parental leave costly for firms and coworkers?”


Most existing evidence on the effectiveness of family leave policies comes from studies focusing ontheir  impacts  on  affected  families  -  mothers,  fathers,  and  their  children  -  without  a  clear understandingof the costs and effects on firms and coworkers. We estimate the effect of a female employee givingbirth and taking parental leave on small firms and coworkers in Denmark. Using a dynamic difference-in-differencesdesign, we compare small firms in which a female employee is  about  to  give  birth  to  an  observationallyequivalent  sample  of  small  firms  with  female employees who are not close to giving birth. Identificationrests on a parallel trends assumption, which  we  substantiate  through  a  set  of  natural  validity  checks.We  find  little  evidence  that parental  leave  take-up  has  negative  effects  on  firms  and  coworkers  overall.Specifically,  after accounting  for  wage  reimbursements  received  by  firms  offering  paid  leave,  thereare  no measurable effects on firm output, labor costs, profitability or survival. Coworkers of the womangoing on leave see temporary increases in their hours, earnings, and likelihood of being employedbut  experience  no  significant  changes  in  well-being  at  work  as  proxied  by  sick  days.  These limitedeffects of parental leave reflect that most firms are very effective in compensating for the worker  onleave  by  hiring  temporary  workers  and  by  increasing  other    employees'  hours.  In contrast,  we  do  findevidence  that  parental  leave  has  negative  effects  on  a  small  subsample  of firms that are less able touse their existing employees to compensate for an absent worker.


Read the paper here.