Abstract
After childbirth, while parents are delighted at public cash transfers like the German ‘Elterngeld’ (parental leave benefit), the decline in mothers’ earnings capacity is an awkward issue that tends to hover in the background. This paper aims firstly to make a contribution to quantifying West German mothers’ foregone gross earnings that stem from intermittent labor market participation, due to the birth of their first child. Secondly, it discusses behavioral outcomes of the resulting implicit child costs in a dynamic bargaining model of household decisions. The regression results of a Mincer-type wage equation, with German Socio-Economic Panel Data (West) for the period 1984–2005 and correcting for sample selection (Two-step Heckman), indicate considerable wage penalties due to birth-related employment withdrawal. On the closure of the fecund window, mothers suffer gross hourly wage cuts of up to 25%, compared to their equally educated, non-stop full-time employed counterparts, and the total of annualized losses amounts to as much as 201,000 Euros. Although foregone earnings do not matter as much in stable partnerships, they turn out to be a veritable asymmetric specialization risk that can prevent women from having children, if divorce seems sufficiently probable.
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Notes
p. 81.
The expressions ‘partnership’, ‘household’, ‘connection’, ‘commitment’, ‘liaison’ etc. are used synonymously in this paper, since the decisive issue is that of having a common household.
Interestingly, the theory of female endowment advantage, with respect to household work, relies on the assumption of compatibility between pregnancy and nursing, and household tasks (Becker 1981, p. 38).
The multiplicative conjunction of marital gains indicates interdependent individual utilities and serves as an incentive for both partners to maximize total household output. Individual utilities are assumed to be intertemporally additive. See Ott (1995), p. 80-91 for a complete formulation of the model.
More specifically, I estimated numerous fixed and random effects model specifications and calculated the resulting wage losses based on the regression results. The findings indicate that calculations based on fixed effects estimations vastly overestimate wage losses, whereas random effects estimations lead to rather conservative simulation results at the lower end of the loss range.
The estimated employment propensity refers only to the domestic background of the individual, not to the job conditions; neither is there an estimation of re-employment propensity which is responsive to the previous work situation.
The marginal effect of the explaining variable j, δPr(y = 1|x)/δxj, illustrates the effect of an infinitesimal variation or, with regard to dummies, of a switch from value “0” to value “1” on employment propensity.
For example, if the preceding year was the first of a full-time spell, it is designated as a current full-time year. By contrast, if the full-time period ended in the year before last, that year belongs to previous full-time employment, whereas the last year is designated as current part-time, out-of-labor-force time or registered joblessness. One single employment status was assigned to each year, depending on the reported monthly status frequencies.
The wage penalties of joblessness resemble those of an otherwise (non-birth) motivated time-out, but they persist longer. Indeed, the joblessness parameters are not statistically significant. To shorten the analysis, I refrain from outlining the parameters of workplace-related variables, most of which are highly significant.
No compulsory school degree plus no vocational degree is labeled “low education”, intermediate secondary school plus vocational training is denoted “medium education” and matriculation standard plus university degree, as “higher education”.
As mentioned above, since graduates are under-represented amongst employment sample mothers, this leads to an overestimation of their postnatal re-employment propensities, by underestimating the resulting wage losses of graduate women.
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Boll, C. Mind the gap—German motherhood risks in figures and game theory issues. Int Econ Econ Policy 8, 363–382 (2011). https://doi.org/10.1007/s10368-011-0188-x
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DOI: https://doi.org/10.1007/s10368-011-0188-x