Essays on Family Policies and the Child Penalty

Troccoli's dissertation consists of three essays and one published article, of which the connecting theme is family policies, in particular maternity and parental leave.

The first and third essays analyse the introductions and gradual extensions of maternity and parental leave in Finland between the 1960s and the early 1980s. I estimate causal effects of these policy changes on the labour market outcomes of eligible parents in the medium-to-long run (essay I) and on children's education and employment, as well as cognitive and non-cognitive skills of male army recruits (essay III). As the child's date of birth determined parents' eligibility to longer leave, I employ a regression discontinuity design comparing the outcomes of children (or their parents) born before and after the reforms' cut-off dates. In both studies, I find imprecisely estimated null effects, indicating that the reforms did not clearly improve nor worsen parents' and children's outcomes. Effects within the range of -10% and +10% of the mean cannot be excluded. Only for the first reform introducing maternity benefits in 1964, the zero effects are precisely estimated.

The second essay, joint with Kristiina Huttunen, presents evidence on the evolution of the child penalty in Finland over the last 50 years. During this time, several family policy reforms radically improved the conditions of new parents. Now, Finland has one of the most generous and longest parental leaves in the world. Parents are also older and more educated than in the 1970s. Exploiting population-wide administrative records from 1970 until today, we find that the child penalty has decreased by almost 60%, from around 60% to 25%. However, most of the decline happened in the first ten years, during which both the availability of formal subsidized day care and the length of paid parental leave expanded significantly. The child penalty has been surprisingly stable from the late 1980s. The stabilisation of the child penalty coincides with the introduction of the child homecare allowance. This is a generous child benefit paid to parents that do not place their children into formal (subsidized) child care, and is available until the youngest child’s third birthday. We further show how differences in the child penalty are associated with parents’ characteristics and their leave use. We find that increases in parents’ educational level and age at birth are associated with improvements in the child penalty. Additionally, leave-taking behaviour consistent with a more equal distribution of childcare responsibilities between fathers and mothers is associated with a lower child penalty.

In the fourth essay, forthcoming in the Journal of Applied Econometrics, I replicate the paper by Danzer and Lavy (2018). They study how the duration of paid parental leave affects children's educational performance using data from PISA. They find that an extension of the maximum duration from 12 to 24 months in Austria had no statistically significant effect on average, but they highlight the existence of large and statistically significant heterogenous effects that vary in sign depending on the education of mothers and children's gender. I replicate their study following the recommended estimation procedure taking into account both the survey's stratified two-stage sample design and the fact that PISA relies on imputation to derive student scores. I show that the estimates of the effects of the parental leave extension become substantially smaller in absolute magnitude and non-significant.

Contact Claudia Troccoli

Email:  claudia.troccoli@aalto.fi
Twitter: @ClaudiaTroccol1
LinkedIn: https://www.linkedin.com/in/claudia-troccoli/