Abstract
We study the short- and long-run effects of having a child on labour market outcomes of mothers compared to non-mothers. Using matched employer-employee data for Italy over 1985–2018, through an event study methodology around childbirth, we show that the long-run child penalty in annual earnings is 52 log points and the penalty largely depends on the reduction in weeks worked by mothers. We then investigate sorting of women with and without children across different types of firms, providing evidence that mothers work in firms with lower productivity, sales, capital and wages after childbirth. Differences in rent-sharing between mothers and non-mothers explain 11.3% of the long-run child penalty in weekly wages, mostly due to between-firm components. Finally, we explore the individual-level, firm-level, and cultural factors that influence the size of child penalties. We find that the child penalty is higher for young, low-wage mothers and those taking longer leaves. It is larger in small firms with less generous pay and worse peers, and in more gender-conservative regions.
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Notes
De Philippis and Lo Bello (2022) study the child penalty in participation over time, offering a complementary view on the child penalty on the extensive margin, while our focus is mostly on the intensive margin.
The measure of earnings is gross of labour income taxes and pension contributions on the side of the employee.
The maternity leave has a mandatory duration of 5 months and can be taken 1 to 2 months before the expected childbirth and lasts until 3 to 4 months after.
Connected groups contain all the individuals that have ever been employed at one of the firms in the group and all the firms that have ever hired one of the workers in the group. Thus, two groups are not connected if one person of the second group has never been employed by a firm of the first group and a firm in the first group has never employed a person of the second group (or viceversa). Since fixed effects are identified up to a normalising constant, different connected groups give fixed effects estimates that are not comparable across each other. Hence, we keep the largest connected group, only. This group comprises 94.5% of the original sample. Note that we estimate AKM worker and firm effects using the full sample of both men and women, although the main analysis will focus on the latter, only. We do this to maximise the size of the largest connected group and to reduce limited mobility bias (Andrews et al. 2008). Specifically, we estimate the following regression:
$$ w_{it} = \alpha_{i} + \psi_{J(i,t)} + \mathbf{x}_{it}^{\prime} \gamma + \varepsilon_{it} $$where wit are log weekly wages of worker i in year t. αi and ψJ(i,t) are worker and firm fixed effects, where the firm is indexed by J(i,t). \(\mathbf {x}_{it}^{\prime } \) contains time-varying observables (cubic polynomials in age and tenure, occupation dummies, part-time dummy, and their interaction with a gender dummy) and year fixed effects. εit is an error term.
Women having more than one child are included in the analysis, but we study only the impact of their first child.
We also use averages over time in order to reduce noise in financial quantities and to interpolate missing values in cases in which a firm has gaps in the balance sheet data.
The mandatory maternity leave lasts 5 months. There are no policy changes regarding mandatory maternity leave over the period of analysis. During mandatory leave, mothers receive 80% of their average daily wage in the month before the leave. After this period, parents can take an optional parental leave for up to 6 months until the child turns 8 years old before 2015 and 12 years old after 2015. Until the child turns 3 years old (6 years old after 2015), the parent receives a compensation equal to 30% of his or her wage for the period the parent is on parental leave. The total duration of the parental leave in a family cannot exceed 10 months, unless the father takes more than 3 months: in this case, the father-specific leave is extended to maximum 7 months and the family’s total parental leave duration is extended to 11 months.
These results are based on log annual earnings in the main job, i.e. the one with the highest number of weeks worked or with the highest earnings. We find very similar results if we use total earnings across jobs as outcome (Figure A.2 in the Appendix).
Since we can only identify births for women that, at the time of childbirth, are working and are employed in the non-agricultural private sector, the group of mothers has a relatively high attachment to the labour market. Moreover, we may incorrectly classify mothers, who have their child while not working in the non-agricultural private sector, in the control group of non-mothers. Both these data limitations likely generate a downward bias in the child penalty estimates.
Note that, given the nature of our data, we are unable to measure whether women move to unemployment, self-employment, or public employment, as we only have information on employment in the non-agricultural private sector. Thus, we can only measure employment/non-employment in the latter.
See footnote 7 for details on the legislation of maternity and parental leaves.
Since we measure firm characteristics in the year before childbirth, we are restricting the sample to workers observed in that year. In Casarico and Lattanzio (2021) we define groups based on firm characteristics at each event time k to keep all the observations and find similar results to the ones reported here.
Specifically, we compute weighted averages of responses for each region using the weights provided by the EVS itself.
This is in line with cross-country evidence provided in Kleven et al. (2019b).
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Acknowledgements
The authors would like to thank the anonymous referees for helpful comments and suggestion. We would like to thank Francesca Carta, Augusto Cerqua, Francesco D’Amuri, Giulia Giupponi, Joanna Kopinska, Eliana Viviano, seminar participants at University of Rome La Sapienza, Bank of Italy, and SEHO 2022, and editor Terra McKinnish for useful comments and suggestions. The views expressed in this article are those of the authors and are not the responsibility of the Bank of Italy or the Eurosystem.
Funding
Salvatore Lattanzio received financial support for PhD studies from ESRC DTP Studentship (nr. ES/J500033/1) and Cambridge Commonwealth European and International Trust.
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Casarico, A., Lattanzio, S. Behind the child penalty: understanding what contributes to the labour market costs of motherhood. J Popul Econ 36, 1489–1511 (2023). https://doi.org/10.1007/s00148-023-00937-1
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DOI: https://doi.org/10.1007/s00148-023-00937-1