The causal effect of paid parental leave on gender equality: A comparative analysis with a synthetic control method

Abstract: This study estimates the causal effect of paid parental leave on gender equality. California and New Jersey are the two first states in the United States to implement a statewide program offering six weeks of compensated parental leave, when having a new-born or adopted child. To estimate the effects of these reforms, I use repeated cross-sectional micro-level Census and ACS data from 2001 and 2015. For each state and outcome, I construct a synthetic control out of the remaining states, and compare it to the treated state in a Difference-in-Differences (DiD) approach. The study investigates the impact on share of hours worked and share of wage earned by the mother in the household, as well as on the labour market outcomes; labour force participation, wage level and average hours worked per week. I find a significant increase in share of hours worked in New Jersey and share of wage earned by the mother in California, which indicates a small positive effect on gender equality. A dynamic analysis validates the robustness of the findings for New Jersey. However, the dynamic analysis reveals that the increase in California is not solely driven by the intervention, as I identify a clear positive pre-trend prior to the intervention in labour force participation among mothers. Any conclusions regarding the general effects of paid parental leave on gender equality in California can hence not be drawn. Further, I find that the effect on gender equality in New Jersey is mostly driven by a change on the extensive margin: More married mothers, especially low-income mothers, participate in the labour force as a consequence of paid parental leave.