Abstract: An important feature of the U.S. labor market is that,
even after controlling for measurable differences in education and
experience, the average wage of women with children is 89 percent
of the average wage of women without children. This ``family gap\\\"
in wages accounts for almost half the gender gap in wages.
Proponents of mandatory-leave policies argue that career
interruptions associated with fertility have long-lasting effects
on female employment and are costly in terms of human-capital
losses for females. Despite the fact that mandatory leaves are
widely applied in developed countries, their effects on the
economy are not well understood. We develop and calibrate a
general-equilibrium model of fertility and labor-market decisions
to study the quantitative impact of such policies. We build on the
Mortensen and Pissarides (1994) labor-market framework by
introducing male and female workers, general and specific
human-capital accumulation on the job, and temporary separations
between the worker and a job. We find that: ($i$) the loss of
specific human capital accounts for a small fraction of the wage
gaps and ($ii$) mandatory-leave policies have substantial
aggregate and redistributive effects on fertility, employment, and
welfare. Interestingly, we find that the general-equilibrium
effect of mandatory-leave policies is a reduction in the amount of
time females spend at home with children.
Keywords: Parental leaves, fertility, specific human capital, temporary separations.
JEL Classification: J2,J3