Yuliya Kulikova (Okinawa Institute of Science and Technology) will present "Family-Friendly Policies and Fertility : What Firms Got to Do With It ?"

Abstract :
Family-friendly policies exist in every high-income country. These policies are meant to help women balance work and family life and to encourage them to enter and stay in the labor market. Implicitly or explicitly, such policies also encourage fertility since having a child makes the balancing act much harder for working women. How effective are such policies in increasing fertility ? We answer this question using a search and matching model where firms make hiring, promotion, and firing decisions. In the model, all jobs start as temporary with a low firing cost, and if a promotion takes place, they become permanent with a higher firing cost. Women decide whether or not to participate in the labor market and, if they do, whether or not to accept offers from firms, accumulating human capital as they work. They also decide how many children to have and when to have them. Jobs can be flexible or inflexible, where inflexibility entails a wage penalty for having a child. Hiring a woman is costly for a firm, both directly, in the production if they offer an inflexible job, and indirectly, through high turnover. Our analysis focuses on Spain, a country with very low fertility and a highly-regulated labor market. We use detailed administrative data from the Spanish Social Security records to discipline the model and to evaluate the effects of alternative family-friendly policies. We first consider the effects of the Spanish Family Reconciliation Act of 1999, which allowed workers with children younger than 6 years old to work part-time and be protected against dismissals or layoffs. Finally, we study a battery of policies that make firing and promotion harder or easier for women. We show that firms’ reactions to family-friendly policies generate a trade-off : policies that increase (decrease) fertility result in lower (higher) average earnings, a larger (smaller) gender wage gap.