Family Pension Benefits and Maternal Employment - Evidence from Germany

fredag, 11 desember 2015

Child care pension benefits in Germany are designed to compensate for maternal employment interruptions due to child-birth. In comparison to most family benefits, child care pension benefits are accumulated upon child birth but only become effective on the verge of retirement. Hence, whether mothers adjust their employment status in response to the economic incentives depends crucially on how they discount the long-run consequences of their current decisions.

This paper tests the hypothesis that child care pension benefits reduce maternal employment. The paper exploits the benefit extension in 1992 as a natural experiment in a regression discontinuity design to estimate short- and medium-run maternal employment effects. All results indicate that mothers do not consider child care pension benefits in their employment decision.