How Does Parental Leave Affect Career Ambitions?

von Lara Redmer

Prof. Dr. Guido Friebel (Lehrstuhl für Personalwirtschaft)

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A vast body of research has investigated the effects of parental leave policies on fertility (e.g., Björklund, 2006; Lalive & Zweimüller, 2009; Cannonier, 2014; Cygan-Rehm, 2015), fathers’ childcare involvement (e.g., Ekberg et al., 2013; Boll et al., 2014; Bünning, 2015) and labor market outcomes such as return to work and earnings or wage gaps (e.g., Ruhm, 1998; Baker & Milligan, 2008; Akgunduz & Plantenga, 2013; Kluve & Tamm, 2013; Lalive et al., 2014; Schönberg & Ludsteck, 2014). While behavioral reactions to leave policies are therefore relatively well-documented, much less is known about how parental leave affects attitudes, specifically work-family preferences.

Economists have so far mainly focused on assessing to what extent policies influence economically relevant outcomes, often without accounting for potential heterogeneity in attitudes and preferences. Investigating how parental leave policies modify work-family preferences might help explain why (or why not) certain policies eventually affect outcomes of interest.

This thesis examines the effects of parental leave policy on relative career ambition, defined as absolute career ambition minus family orientation. An expansive German parental leave reform in 2007 as well as two earlier reforms in 1992 and 2001 are used as exogenous variation. The 2007 Elterngeld reform replaced a means-tested flat rate with a universal benefit offering a 67% wage replacement rate, introducing a leave regime that was more comprehensive in terms of replacement rate, yet less generous with respect to benefit duration. In addition to that, the reform introduced two “daddy months” – parental leave reserved for the parent taking less leave, usually the father. As fathers have since increased their parental leave take-up significantly (cf., RWI, 2008), it is possible to examine how the reform affected fathers’ work-family preferences compared to those of mothers.

Moreover, as several studies find heterogeneous responses to policy reforms (e.g. Han et al., 2009; Lalive & Zweimüller, 2009; Joseph et al., 2013; Boll et al., 2014; Raute, 2014; Bartel et al., 2015; Schober & Zoch, 2015), I also examine whether the reform affected work-family preferences differentially depending on region, education, pre-reform eligibility, relationship status and number of children. In summary, the research questions are as follows:

  • How does parental leave affect career ambitions?
  • Do parental leave policies affect women’s and men’s career ambitions differently?
  • Are there heterogeneous responses in work-family preferences with respect to region, education, and other covariates?

This thesis contributes to a small but growing body of research that incorporates attitudes, preferences, and behavioral intentions into the study of the effects of parental leave policies (e.g., Bergemann & Riphan, 2011; Kotsadam & Finseraas, 2011; Gangl & Ziefle, 2015; Bassford & Fisher, 2016). Gangl and Ziefle (2015) investigate the effect of two earlier German parental leave reforms on career ambition, finding a negative relationship between parental leave and women’s work commitment. This thesis updates and extends their research by examining the effects of the 2007 reform on work-family preferences of both mothers and fathers, and by specifically testing for heterogeneous responses. Beyond that, my analysis allows for dis-entangling any potential effects on relative career ambition into whether they affect absolute career ambition, family orientation, or both.

The analysis is based on data from the German Socio-Economic Panel (SOEP) for the period from 1990-2012. Using difference-in-differences (DiD) estimates and comparing parents within one to two years around reform implementation, the analysis finds that the 2007 reform led to an aggregate increase in mothers’ family orientation, yet did not change relative career ambition. Furthermore, the reform did not significantly affect fathers’ work-family preferences. There are, however, heterogeneous responses to the reform with respect to pre-reform eligibility, region, relationship status and the number of children. Mothers and fathers in East Germany respond to the reform more strongly by significantly increasing family orientation, resulting in a decrease in relative career ambition. Single mothers and first time mothers significantly increase family orientation, while fathers with more than one child decrease their career ambition following the reform.