The Impact of Parental Leave Duration on Later Wages

We investigate the existence of a causal relationship running from parental leave duration to subsequent wages. We exploit a French policy which gives financial incentives to take a parental leave. This policy was at first targeted towards parents of a third-born child. We use the extension to parents of a second-born child in 1994 as an exogenous shock on parental leave duration. Two administrative datasets provide us with information on wages and familial background from 1976 to 2005. We first show that this reform did induce many mothers to withdraw from the labor market in the 3 years following the birth. We then turn to career development after the return to work: estimations in double differences suggest that interruption duration would have a negative causal impact on wages after the return to work. Part of this wage loss could be due to a decrease in the number of hours worked per day.