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Anti-discrimination Legislation and the Efficiency-Enhancing Role of Mandatory Parental Leave
Uppsala Center for Fiscal Studies.
Department of Economics, Ben Gurion University, Israel.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2016 (English)Report (Other academic)
Abstract [en]

We study a setting where anti-discrimination legislation gives rise to adverseselection in the labor market. Firms rely on nonlinear compensation contracts toscreen workers who differ in their family/career orientation. This results in a labormarket equilibrium where career-oriented workers are offered an inefficientlylow duration of parental leave. In addition, family-oriented workers are offeredlower wages as compared to their equally skilled career-oriented counterparts. Wedemonstrate the usefulness of mandatory parental leave rules in mitigating thedistortion in the labor market and derive conditions under which a Pareto improvementis possible. We also characterize the optimal parental leave policy andhighlight the possibility for parental leave legislation to eliminate the wage penaltyof family-oriented workers by supporting pooling employment contracts.

Place, publisher, year, edition, pages
Uppsala, 2016. , 40 p.
Working paper / Department of Economics, Uppsala University (Online), ISSN 1653-6975 ; 2016:7
Keyword [en]
anti-discrimination, adverse selection, parental leave, efficiency
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Research subject
URN: urn:nbn:se:uu:diva-294544OAI: diva2:930499
Available from: 2016-05-24 Created: 2016-05-24 Last updated: 2016-05-25Bibliographically approved

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