Association for Public Policy Analysis & Management

At the end of 2009, the Australian government began ironing out the details for their forthcoming Paid Parental Leave (PPL) scheme for new parents who are the primary caregivers of a child born or adopted on or after January 1, 2011. An eligible primary caregiver will receive taxable PPL payments of $672.70 a week (the Federal minimum wage level in Australia), for a maximum of 18 weeks. This policy change creates a natural experiment that allows me to assess how introducing the parental leave payment scheme after a child is born affects maternal health and employment, and child health and development.

This paper will use confidential data from the Household, Income, and Labor Dynamics in Australia Survey (HILDA) from 2001-2014, and the Longitudinal Study of Australian Children (LSAC) from 2004-2014 to estimate the effect of the introduction of paid parental leave on maternal labor market outcomes and child health and development. To identify the effect, a regression discontinuity design (RDD) will be implemented, comparing the outcomes of mothers and children who gave birth or were born before January 1, 2011 to the outcomes of mothers and children who gave birth or were born after January 1, 2011.

Prior literature studying the effects of family leave on child health and mothers’ labor market outcomes is mixed, possibly due to the substantial heterogeneity in parental leave policies across the globe. Most of the previous empirical literature has studied the effect of expansions of maternity and parental leave policies rather than an introduction of such a policy. Enacting a policy that introduces paid parental leave for the first time may have dramatically different effects on child health and maternal labor market outcomes than simply an expansion of one.

This paper contributes to the literature on the effect of parental and family leave on child health and mothers’ labor market outcomes. This paper adds to this literature in two ways. First, my rigorous empirical strategy provides credible estimates of the effect of a paid parental leave introduction, Australia’s PPL scheme, on child health and development outcomes, and the mothers’ labor market outcomes. Second, using confidential data, I am able to estimate these effects in the short-run (1 year), and somewhat long-run (3 years). This estimation will be able to shed light on the concern that generous parental leave laws will hurt mothers in the long-run because prolonged periods off work may lead to depreciation of human capital and less favorable future labor market possibilities.