Events

Workers often fear that taking leave may harm their career progression and future earnings, despite their entitlement to a variety of statutory leave policies and job protections. In this paper, we ask whether and why such concerns may be justified, focusing on two main reasons: loss of human capital (direct effect) and losing out against non-taking co-workers (competition effect). By exploiting a policy reform that exogenously assigned new fathers to four weeks of paternity leave based on child birth dates, we find a strong support for the competition effect but not the direct effect. When a larger share of one’s competitors are induced to take leave, own earnings are put on a better trajectory than otherwise after child birth. The competition effect we uncover suggests a possible role of mandated paternity leave in narrowing the male-female earnings gap post-child births.