Abstract:

The arrival of children implies a sharp reduction in mothers’ earnings and labor supply while fathers’ labor market trajectories are unaffected. To understand this specialization, I exploit a Danish parental leave reform. Upon reform implementation, mothers increase their leave by 5 weeks while the average leave duration of fathers remains unchanged, irrespectively of relative earnings. The increase in leave duration reduces women’s labor market earnings and their share of household income. Consistent with the role of gender identity, women who had a working mother take a shorter leave than those with a stay-at-home mother. Moreover, I document peer effects among sisters who take a longer leave if exposed to the reform-induced change in leave duration.