Labour market effects of reducing the gender gap in parental leave entitlements

Abstract

We explore the effects of parental leave entitlements for mothers and fathers on wages and employment. We consider male and female workers who compete for the same jobs in a labour search and matching model with endogenous job search and leave take-up rates. We identify key theoretical effects and calibrate the model to simulate policy changes in France, Italy, Norway and Portugal. Reducing the gap in parental leave entitlements reduces gender wage gaps and increases gender employment rate gaps in these countries. Leave take-up rates increase with paid leave duration. In general, we find that job search intensity decreases when longer paid leave duration decreases wages