Work in Progress
The Effect of Parental Leave Policies in Labor Markets with Search Frictions (Job market paper) [Download]
I analyze the impact of parental leave policies on fertility and female labor supply in a dynamic discrete choice framework. I stress the importance of labor market risks and the prevalence of temporary work contracts in the childbearing decision. I estimate a dynamic structural model with labor market search frictions based on a rich German panel dataset providing survey measures on job losses and transitions to permanent work contracts, for the time period between 2007 and 2014. Estimates suggest that cutting the parental leave job protection period from three to two years would reduce the total fertility rate (TFR) by about 0.04. Furthermore, it would increase average employment by about 0.3 percentage points. At the same time, increasing the maximum entitlement period of parental leave benefits from one to two years increases the TFR by 0.14, and reduces female employment by 0.4 percentage points. I conclude that parental leave policies can have significant consequences for birth rates, which should be kept in mind when attempting to steer the labor supply of parents. Moreover, policies seem to be more effective at the two-year margin than beyond. Findings are preliminary.
Job Search with Subjective Wage Expectations (w/ Luke Haywood and Amelie Schiprowski) [Download]
This paper analyzes how subjective expectations about wage opportunities influence the job search decision. We match data on subjective wage expectations with administrative employment records. The data reveal that unemployed individuals overestimate their future net re-employment wage by 10% on average. In particular, the average individual does not anticipate that wage offers decline in value with their elapsed time out of employment. How does this optimism affect job finding? We analyze this question using a structural job search framework in which subjective expectations about future wage offers are not constrained to be consistent with reality. Results show that wage optimism has highly dynamic effects: upon unemployment entry, optimism decreases job finding by about 8%. This effect weakens over the unemployment spell and eventually switches sign after about 8 months of unemployment. From then onward, optimism prevents unemployed individuals from becoming discouraged and thus increases search. On average, optimism increases the duration of unemployment by about 6.5%.