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ECOS3027: Economics of the Family - Lectures Notes 10

Fertility IV

Marian Vidal-Fernandez

Semester 2 2017

Background reading
** – required reading (as on UoS outline); * – key background readings

• **BFW7 Chapter 16 or BFW5 pp.348-368

• *OECD Family database: PF2.1 (Key characteristics of parental leave systems) and PF2.5
(Trends in parental leave policies since 1970):

• **Ekberg, J., R. Eriksson, and G. Friebel (2013), “Parental Leave A Policy Evaluation
of the Swedish Daddy-Month Reform.” Journal of Public Economics, 97, pp.131-143

• **Breunig, Weiss, Yamauchi, Gong, and Mercante, 2011, Child Care Availability, Quality
and Affordability: Are Local Problems Related to Labour Supply?, Economic Record,
87(March), pp.109-124

• *Guryan, Jonathan, Erik Hurst, and Melissa Kearney. “Parental Education and Parental
Time with Children.” The Journal of Economic Perspectives 22, no. 3 (2008): 23.

• *Hazan, Moshe, and Hosny Zoabi. “Do highly educated women choose smaller families?.”
The Economic Journal (2014).

1 Parental leave
• Most models of fertility include a need for time investment in children – this is often
important in generating a negative relationship between income and fertility

• So, how to combine this time investment with work? Parental leave policies will be

• Different countries take very different approaches: from no paid leave at all (and limited
rights to unpaid leave) in the United States, through to generous paid leave provisions

OECD Family database
OECD - Social Policy Division - Directorate of Employment, Labour and Social Affairs

entitlement to maternity leave as such in Australia. However, women may take up to six weeks of the parental leave entitlement prior
to the expected birth,  for  which  payment  can  be  received  under  the  Government’s  Parental  Leave  Pay  system.
Sources: as for Tables PF2.1 B-E.
Chart PF2.1.A: Paid child-related leave periods by duration the full-rate equivalent (FRE) of the
leave period if paid at 100% of usual earnings, and the remaining "unpaid" weeks, 2013

Panel A: Paid maternity leave entitlement

Panel B: Paid paternity leave entitlement for fathers which cannot be transferred to partners

Panel C: Paid parental leave entitlement

Notes: see section on data and comparability issues. Source: see Table PF2.1.B to E
Source: OECD Family database PF2.1

3 Last updated 01/05/2014

early 1980s (countries on the left-hand side of the figure) with those where the variations in duration
of paid leave have been small (countries on the right-hand side). The reduction of the total duration of
paid leave since the mid-1990s in Austria, the Czech Republic, Germany and Finland is partly
explained by the introduction of an option which offers higher payment rates to parents for a relatively
short period of leave.
Figure PF2.5.2 Total duration of paid leave after childbirth

2011 1980 1995

140 126
120 110110

80 65 60
60 52 50 50 48
43 42 42 42 39
40 28 26 26
22 18
17 16 16 14 14 12

Source: OECD Family database PF2.5

Comparability and data issues
• Australia
Changeswas extremely
in the legislationlate in introducing
on leave entitlements any form of paid parental
and country-specific leaveare(introduced
coding issues presented in
at the beginning of 2011: 18
the next Annex to the indicator. weeks at minimum wage or lower)
Prior toisthis,
12 tomonths
national unpaid
leave for the 12
after detailed
forhave provided.
those Simona
covered by
Baldi, Simon Chapple, Juliana Zapata and Olivier Thévenon are also acknowledged for their contribution to data
collection workplace agreements (since 1996)
and coding.
– Employers have always been able to provide paid leave as a part of compensation
Further   Reading:   Thévenon   O.,   Solaz   A.   (2012),   “Labour   market   consequences   of   parental   leave   policies   in  
– and public sector
OECD  countries”,  OECD Social,employees
Employment have had a Working
and Migration modestPaper,amount
paid leave standard
for longer
– In 2000, 48% of employed women reported being eligible for paid maternity leave,
and 84% for unpaid leave (Edwards 2006)
– Possibly lower wages to offset this benefit: indication of valuation of these benefits
by women
3 only be taken by fathers (‘use it or lose it’)
• Recent trends towards parental leave that can
– mainly in Scandinavia Last updated 10/10/2012

1.1 Effects of parental leave policies

• Effects on fertility

– Lalive and Zweimueller (2009) look at the effect of length of parental leave at the
birth of a first child on the decision to have a second child
– Data from Austria – doubling of leave from one to two years for children born after
July 1 1990 (at a flat payment rate)
– The increased leave increases the probability of a second child – both due to extended
leave for first child, and increased leave availability for future child

– Bigger effects for lower wage womenJOURNAL OF ECONOMICS


Downloaded from at University of Sydney Library on June 6, 2014


1/6/90 16/6/90 1/7/90 16/7/90 31/7/90

Calendar day

Before After

How Does Parental Leave Affect Higher-Order Fertility?
Figure reports the percentage of women who gave birth to at least one ad-
ditional child within three years after giving birth in June or July 1990. June
smoothed backward, July smoothed forward (15-day moving average). Source.
ASSD, own calculations. Sample restricted to PL-eligible women giving birth to a
child in June 1–30 or July 1–30 of 1990.

Source: Lalive and Zweimueller (2009)

• Effects on return-to-work II also indicates
mothers’ that there are substantially more
births in July 1990 than in June 1990. Is this evidence for birth
timing? We investigate this issue by analyzing the number of
– Lalive and Zweimueller also examine the effects of lengthening parental leave on
births in June and July 1990 on a day-to-day basis, finding a
women’s careers
steady increase but no discontinuity in the number of births on
– Women are far Julyless
1 (not reported).
likely to returnThus, comparing
to work at any June
time 1990 mothers
within to
three years of having
July 1990 mothers, we find little evidence of seasonality in the
a child with the longer parental leave eligibility
composition of cohorts but strong seasonality in the number of
– This reflectsbirths.
a reduction in short-term return-to-work decisions (to renew parental
leave eligibility),Figure
and notIII longer-term
presents first labour
evidence on thedecisions
supply causal effect of ex-
tending PL for the current child on the decision to have an addi-
– Evidence from tional child. The
Australia (seevertical
Hanelaxis measures
2013) thethat
suggests percentage
women their return to
who gave birth to a second child within the
work if they have paid leave, but this has little impact on wages36 months following

19. Indeed, births in July exceed births in June in any given year of our sample
• Effects of leave onperiod
(1985, 1987, 1990, 1993, 1996). Nevertheless, we perform sensitivity tests
comparing births that occur, respectively, in the first/second half of June 1990 and
the first/second
– Context appears half of for
to matter: July the
1990 to
paidthe sensitivity
our results to short-run
appears to be associated
timing of births.
with better child outcomes (Berger et al 2005)
– In contrast, a German reform extending parental leave had little impact on chil-
dren’s educational outcomes, despite having a significant impact on return-to-work
behaviour (Dustmann and Schoenberg 2012), and similar results were found for a
Canadian reform (Baker and Milligan 2010)








1/6/90 16/6/90 1/7/90 16/7/90 31/7/90 0 12 24 36 48 60 72 84 96 108 120

Downloaded from at University of Sydney Library on June 6, 2014

Calendar day Time since birth (months)

Before After June 1990 July 1990

(A) Return to work (B) Proportion returning


Year 2000 Euros



0 12 24 36 48 60 72 84 96 108 120 0 12 24 36 48 60 72 84 96 108 120
Months since birth Months since birth

June 1990 July 1990 June 1990 July 1990

(C) Employment (D) Earnings

Return to Work, Employment, and Labor Earnings, June 1990 vs. July 1990
Panel A reports the percentage of women who have returned to work at least
once within three years after the 1990 birth (June smoothed backward, July
smoothed forward, fifteen-day moving average); Panel B reports the cumulative
proportion of women who have returned to work at least once since the 1990 birth;
Panel C reports average months in employment; and Panel D reports mean labor
earnings per calendar day since the 1990 birth. (Panels C and D are drawn on
an annual frequency; data points at six, eighteen, etc., months refer to the first,
second, etc. year after the 1990 birth.) Employment and earnings are set to zero
for women who do not hold a job. Zeros are included in all our analyses. Source.
ASSD, own calculations. Sample restricted to PL-eligible women giving birth to a
child in June 1–30 or July 1–30 of year 1990.

Source: Lalive and Zweimueller (2009)

Figure VC explores the effects of extended leave on employ-
• Effects of leave only Employment
ment. for fathers patterns of women giving birth to their first
child are strikingly asymmetric. Whereas paid work takes up
about leave
– Trend towards nine reserved
to ten months per prebirth
exclusively year, –time
for fathers doesspent
this in the
increase leave taken?
workplace is below seven months in all postbirth years. Interest-
Does this ingly,
have adverse
wider effects on time-use
PL effects on returnand homedoproduction?
to work not translate into
– Ekberg etlower employment
al (2013) rates.
– Swedish Whereasof
provision there
one ismonth
a clearofshort-run em-to fathers
paid leave
ployment disadvantage of treated mothers compared to control
∗ Fathers took more
mothers in theleave,
secondmothers took
year after the less
birth, employment is
∗ But no basically the same
significant from the
difference thirdshare
in the year of
for sick children, indicating
perhaps no impact onJ. gender
Ekberg et al. /equality aims?
Journal of Public Economics 97 (2013) 131–143 137






Child's date of birth

Fig. 3. Fathers' average parental leave days by date of child's birth, 2-week cohorts.

the three-month cohort; total parental leave per child then decreased
Source: Ekberg0.39%
et al of
the fathers are on parental leave as compared to about
by five days on average.14 Experimenting with several other cohort 0.37% in the weeks before the event. For other events, we find effects
sizes between 1 week and 3 months does not generate different results. of a similar size. It is hard to disentangle the effects of sport events
From Table 7, it becomes clear that the mass point for the male pa- from seasonal variations, and the analysis is further complicated by
rental leave distribution shifts from zero days before the reform to- the fact that we do not have any information about regular paid vaca-
wards 30 days after the reform. In the terminology of the treatments tion. Parental leave may be used as a substitute for paid vacation,
138 J. Ekberg et al. / Journal of Public Economics 97 (2013) 131–143







Child's date of birth

Fig. 4. Mothers' average parental leave days by date of child's birth, 2-week cohorts.






Child's date of birth

Fig. 5. MALESHARE by date of child's birth, 2-week cohorts.

Source: Ekberg et al (2013)

– Patnaik (2014) looks at Canadian evidence
∗ Reduced 50specialisation found in households exposed to ‘daddy quotas’ (ie. those
in Quebec) – increase in home production, reduction in market work
• Is government intervention necessary?
– Problem of adverse
30 selection leading to underprovision if left to private companies
to provide paid parental leave? Mandated provision can solve this
– Government 20funding/subsidy due to externalities? (but distortions from required

2 Childcare 0

• Time investments into children do not cease when parental leave is used up: how are
Child's How
children cared for (own, formal, informal care)? date ofdoes
birth this vary with education?

Fig. 6. Fathers' share of CSC days by child's date of birth, 2-week cohorts.
• First, the number of hours of childcare required is not fixed: if we look at time use data,
different children are reported to have different numbers of hours of care. The number of
hours parents spend with children varies a lot across educational groups

2.1 Parental care

– Guryan et al (2008) document (for the US, 2003-2006) that parental time with
children increases with education, despite the fact that hours in the labour market
also increase (whilst leisure and home production time falls)
∗ Surprising given the increasing opportunity cost of time?
∗ Men average 6.8 hours per week, women 14.0 hours; working men 6.5 hours,
working women 11.6 hours; nonworking men 9.9 hours, nonworking women 18.7
∗ Strong educational gradient for women’s hours of child care

Source: Guryan et al (2008)

∗ This is child care as ‘primary’ activity
∗ If, instead, hours spent around children, 45 hours for mothers and 30 for fathers;
no educational gradient
∗ Investment in children as a luxury good? Concern about market child care
quality? Higher returns to child investment?
∗ Ramy and Ramy (2010) suggest this educational gradient reflects the ‘rug rat
race’: greater competition for college places causes more highly educated parents
to invest more heavily in college preparedness

2.2 Formal childcare: effect on labour fource participation, fertility and chil-
dren’s outcomes

• Government provision of childcare, or subsidies reducing the costs of childcare, can in-
crease fertility rates – reforms in Germany, Sweden and Norway have been examined to
demonstrate this

tion does not create any model instability prob- example, the hours coefficient which determines
lems, as the Hessian matrix is full rank in both the elasticity never changes by more than
the probit models and the labour supply models. 0.0005 in any of the models that include the
However, the problem is one of interpretation. child care difficulty questions.
Given that the variables are highly correlated, it We briefly discuss the results in the following
is not appropriate to conduct a thought experi- two sub-sections and provide a more compre-
• Therement
is a inclear
which one of thebetween
correlation variables childcare hensive discussion
changes availability and thein Section
. of mothers
while the others stay the same.
– Breunig et al (2011) demonstrate
The three panels of Table 7 present these this using Australian data
(i) The Probability of Working
results for the reduced form probit model of We find strong evidence that local difficulties
– working.
In areasTable where 8 presents the results for
poor childcare the with quality
availability, child care haveaffordability
and a negative effect
structural labour supply model. Tables 7 and 8 decision to work (Table 7) for partnered women
only presentare significantly
the coefficients from less likely
the child careto participate in All
and lone parents. theoflabour
the childforce even when
care difficulty
controlling for observable characteristics: these perceptions have an independent
variables. We do not report the coefficients on variables, when included in the model one-by-
the other variables in the model as they are one, are statistically significant and negative.

Effect of SD Average Responses to Questions about Child Care on Decision to Work Waves 1 to 7 Pooled;
Marginal Effects (Standard Errors)

Average response within SD

Question Partnered women Lone parents

Results with one summary measure of any difficulty

Any difficulty question )0.031** (0.0059) )0.043** (0.012)
Results with simultaneous controls for availability, quality and cost
Any quality question )0.010 (0.011) )0.019 (0.025)
Any availability question )0.0088 (0.011) )0.017 (0.022)
Difficulty with the costs of child care )0.012** (0.0064) )0.0069 (0.012)
P-value for test of joint significance 0.000** 0.004**
Results with variables introduced one-by-one into model
Questions relating to quality
Difficulty in finding quality child care )0.027** (0.0054) )0.034** (0.010)
Difficulty in finding right person to care for my child )0.027** (0.0053) )0.034** (0.011)
Difficulty in finding care that my children are happy with )0.027** (0.0056) )0.044** (0.011)
Any quality question )0.030** (0.0058) )0.042 ** (0.012)
Questions relating to availability
Difficulty in finding care for hours needed )0.026** (0.0052) )0.038** (0.010)
Difficulty juggling multiple child care arrangements )0.021** (0.0049) )0.029** (0.0093)
Difficulty finding a place in the child care centre of choice )0.018** (0.0045) )0.020** (0.0091)
Difficulty finding child care in the right location )0.023** (0.0047) )0.026** (0.010)
Any availability question )0.028** (0.0056) )0.038** (0.011)
Question relating to cost
Difficulty with the costs of child care )0.023** (0.0046) )0.025** (0.0094)
Sample sizes 11,049 to 11,056 3286 to 3290

Notes: *Statistically significant at the 10 per cent level (or lower); **statistically significant at the 5 per cent level (or lower).
Standard errors are calculated taking into account clustering from inclusion of multiple observations on same individuals across

Source: Breunig et al (2011)

! 2011 Australian Treasury
Economic Record ! 2011 The Economic Society of Australia
• Hazan and Zoabi (2014) present evidence that the education-fertility gradient in the US
has changed in the past ten years

– Now, women with advanced degrees are having more children than those without a
Bachelor’s degree: there is a U-shaped relationship, and this is new
– The authors present suggestive evidence that changes in the costs of childcare relative
to the mother’s own wages may be responsible for this
– The relative cost of childcare has only fallen significantly for women with 4-year and
advanced degrees
– Suggestion that the change to a U-shaped relationship would not have occurred with
a constant relative price of childcare
– There is a double effect for highly educated women: the direct price effect, and also
making fertility and work more complementary


Hybrid Fertility Rate

1.90 1.89
1.9 1.96
1.86 1.74 1.76
1.7 1.67
1.66 1.69

<12 12 13–15 16 >16
Years of Schooling
Hybrid (n = 24) 2001–2011
Hybrid (n = 24) 2001–2011 Under 1983–85 Prices
Hybrid (n = 24) 2001–2011 Under 1983–85 Prices-differential Effect

Fig. 7. Hybrid Fertility 2001–11, Counterfactual: Hybrid Fertility 2001–11 under 1983–85 Prices,
Counterfactual: Hybrid Fertility 2001–11 under 1983–85 Prices – Differential Effects for Each Educational
Note. See text for more details.Source: Hazan and Zoabi (2014)

restricted model ignores other dimensions that may affect the relationship between the
• Effect on children: Lehrer and Kottelenberg (2011) find that public preschool availability
decision to give birth and childcare costs. Indeed, one may assume that women care
in Canada
pursuing athe performance
career and that this of children
aspiration from low-income
increases with women’s families.
education. ToFelfe et al
(2014) illustrate
also findthis,
a positive effect
assume that on are
there children’s
two typesreading scores
of women: of universal
uneducated women pre-school
who do access
in Spain.
not The effects
care about on children
pursuing a careertend
and to depend
educated on the
women whooutside
do. For option: whothe
the first type, takes care
of themreduction in the relative cost of childcare has a pure price effect. For the second type,
there is an additional effect that stems from a reduction in the rivalry between children
and career. Thus, a reduction in the childcare cost should have a larger effect on the
2.3 Informal childcare:
probability of more grandparents
educated women giving birth. To explore this possibility, we
estimate models that allow for differential effects of childcare cost of the following
• Due to increasing childcare costs, grandmother’s are a substancial source of informal
childcare ! cc " X ! cc "
j w 5
j w
bist ¼ a þ pj eist þ b ln st þ cj eist ln st þ jNist þ da þ dm þ dt þ ds þ eist ;
• In Australia grandparents
take care
wist of
26% of children
wist under 12 regularly and 49% in an
irregular basisj (ABS 2010 and 2012)
where eist are educational group dummies equal to 1 if woman i is in the j educational
• Compton andand
group 0 otherwise.
Pollack (2014)Now
andthe partial and
Posadas association between the (2014),
Vidal-Fernandez relative cost
U.S.:of use dis-
childcare and the probability of giving birth equals b + cj. Table 4 repeats Table 2. The
tance to family in military wives and maternal grandmother’s, respectively to instrument
only difference is the inclusion of the educational dummies and their interaction with
availability of grandparent’s
the relative asseen
cost. As can be childcare
from thegivers.
Table, Find a positive
the effect and
increases withsignificant
the level ofeffect on
labour education
force participation, particularly
(in absolute terms) and thefor disadvantaged
differences individuals.
are quantitatively large. Column (7)

• Aparicio-Fenoll
© 2014 Royaland Vidal-Fernandez
Economic Society. (2015) find also a positive effect on fertility in Italy
using changes in retirement laws.

• Implications on fertility and female labour force participation when designing policies
that delay retirement.

Informal childcare. Sources: OECD Family Database and U.S. Census Bureau. Note: Data for Cyprus
are for the southern part of the island. Data are for 2007 in France, 2009 in the Republic of Korea, and
2005 in the U.S. for which the last group is age 614 and includes multiple care arrangements. Australia
includes only grandparents.

Other references
• Edwards, Rebecca. “Maternity Leave and the Evidence for Compensating Wage Differ-
entials in Australia.” Economic Record 82, no. 258 (2006): 281-297.

• Lalive, Rafael and Josef Zweimuller. 2009. “How does parental leave affect fertility
and return to work? Evidence from two natural experiments,” Quarterly Journal of
Economics, 124(3): 1363- 1402.

• Hanel, Barbara. “The Impact of Paid Maternity Leave Rights on Labour Market Out-
comes.” Economic Record 89, no. 286 (2013): 339-366.

• Berger, Lawrence M., Jennifer Hill, and Jane Waldfogel. “Maternity leave, early maternal
employment and child health and development in the US.” The Economic Journal 115,
no. 501 (2005): F29-F47.

• Dustmann, Christian, and Uta Schoenberg. “Expansions in Maternity Leave Coverage

and Children’s Long-Term Outcomes.” American Economic Journal: Applied Economics
4, no. 3 (2012): 190-224.

• Baker, Michael, and Kevin Milligan. “Evidence from maternity leave expansions of the
impact of maternal care on early child development.” Journal of Human Resources 45,
no. 1 (2010): 1-32.

• Patnaik (2014), Merging Separate Spheres: Can Paternity Leave Reduce Sex Specializa-
tion In The Long Run?, Manuscript. Cornell University.

• Ramey, Garey, and Valerie A. Ramey. “The Rug Rat Race.” Brookings Papers on
Economic Activity 2010, no. 1 (2010): 129-176.

• Felfe, C., Nollenberger, N., and Rodriguez-Planas, N. (2014). Can’t Buy Mommy’s Love?
Universal Childcare and Children’s Long-Term Cognitive Development. Journal of Pop-
ulation Economics (forthcoming).

• Kottelenberg M. and Lehrer, S. New Evidence on the Impacts of Access to and Attending
Universal Childcare in Canada. Canadian Public Policy Volume 39 Issue 2, June 2013,
pp. 263-285.

• Posadas, J. and Vidal-Fernandez, M. Grandparents’ Childcare and Female Labor Force

Participation, 2013. IZA Journal of Labor Policy, 2 (14): 1-20.

• ABS (Australian Bureau of Statistics). 2010. ABS Australian Social Trends 4102.0, June.
ABS, Canberra.

• ABS (Australian Bureau of Statistics). 2012. Education and Training Newsletter: Snap-
shot: Child Care by Grandparents, 4211.0, October ABS, Canberra.

• Compton, J. and Pollack, R.A. 2011. Family Proximity, Childcare, and Women’s Labor
Force Attachment. Journal of Urban Economics, 79(C), 72-90

• Aparicio-Fenoll, A., Vidal-Fernandez, M. (2015). Working Women and Fertility: The

Role of Grandmothers Labor Force Participation. Cesifo Economic Studies, 61(1/2015),

Short answer
1. Does a generous paid parental leave policy benefit women?

2. Give two explanations for the observation that time spent in child care is increasing with
parental education.