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Home Events Yana Gallen (University of Chicago): The effect of parental leave extensions on firms and coworkers

Yana Gallen (University of Chicago): The effect of parental leave extensions on firms and coworkers

This paper studies the effects of parental leave on firms and coworkers by examining a 2002 Danish reform which increased the length of fully-compensated parental leave by 22 weeks. I find suggestive evidence that the reform increases the probability of firm shut-down by about two percentage points five years after the reform, concentrated among relatively small firms. Conditional on survival, I find no impact of the reform on firm value added. Overall, there is no detectable effect of the reform on the earnings or promotions of coworkers in any of the five years after the reform (point estimates are about $100) and can reject differences in yearly earnings larger than $425 overall and differences larger than $280 for female coworkers. There are small negative effects of the reform on earnings of coworkers in the same occupation as women who give birth in the sample period. These earnings losses are small—1-1.5 percent of earnings—and are initially driven by job-changers. Overall, small to zero effects on coworkers suggests that firms are able to find substitutes for workers on leave and that there are limited human capital losses associated with leave. Leave is not costless to small firms, however, as the increased probability of shutdown suggests.