Research

 

Working papers

The Signaling Role of Parental Leave, December 2018
[Job Market Paper]
paper 

Abstract

This paper examines the signaling role of workers' parental leave choices theoretically and empirically. Human capital theory predicts that wages should depend on the absolute duration of time out of work. However, using administrative data from Denmark, I find that women who take a given amount of leave earn higher wages after returning to work if other mothers, in the same childbirth cohort, take longer leaves. The importance of relative leave duration suggests the possibility that leave duration choices signal labor market preferences. I develop a model which posits that firms infer private information about commitment to work through their choice of forgoing paid leave to return to work early. The model delivers distinct predictions of the signaling channel of parental leave when there is an exogenous change in the maximum allowed paid leave duration. I test these predictions using unanticipated leave extension policies in Denmark. I show that changing the equilibrium has indirect effects in changing the signals that are sent by all workers, and also has direct effects in terms of labor market consequences. Consistent with the model's predictions, a leave extension causes infra-marginal mothers, whose leave would not have been constrained by the previously lower maximum, to take longer leave. For mothers for whom the previously lower maximum would have been binding, signaling contributes to a divergence in wages due to the information that their choices convey upon a leave extension. The paper provides direct evidence of persistent labor market consequences of signaling in a context in which signaling operates during the course of one's labor market experience.

 

Daily Labor Supply and Adaptive Reference Points (with Neil Thakral), October 2018
Revise and Resubmit, American Economic Review
paper online appendix

Abstract

This paper provides field evidence on how reference points adjust, a degree of freedom in reference-dependence models. To examine this in the context of cabdrivers’ daily labor-supply behavior, we ask how the within-day timing of earnings affects decisions. Drivers work less in response to higher accumulated income, with a strong effect for recent earnings that gradually diminishes for earlier earnings. We estimate a structural model in which drivers work towards a reference point that adjusts to deviations from expected earnings with a lag. This dynamic view of reference dependence reconciles the “neoclassical” and “behavioral” theories of daily labor supply.

 

Work in progress

The Design of Maternity Leave Policies

Abstract

Statutory maternity leave policies are often summarized by two main policy levers, job protection duration and the average benefit ratio as a fraction of existing wage. I analyze how the design of the benefit structure given the same total budget has differential impacts on the choice of leave duration. A higher benefit ratio increases leave take-up at the margin, and a flat lump-sum structure encourages the reduction of leave duration for mothers whose private benefits from leave taking are lower when leave duration is used as a signal. The design structure can have consequences on long-term labor market outcomes as well as on wage inequality among mothers. Using regression-discontinuity results that leverage exogenous policy changes, I estimate preferences of mothers in a dynamic structural model of labor supply. The model allows for an empirical search of policies that can potentially improve welfare while mitigating the long-term labor market consequences for mothers.