Latent class, or finite mixture, modelling has proved a very popular, and relatively easy, way of introducing much-needed heterogeneity into empirical models right across the social sciences. The technique involves (probabilistically) splitting the population into a finite number of (relatively...

Based on a structural model of fertility and female labour force supply with unobserved heterogeneity and state dependence, we evaluate the 2007 reform of parental leave benefits in Germany, which replaced a flat, means-tested benefit by a generous earnings-related transfer. The model predicts a...