Anti-discrimination Legislation and the Efficiency-Enhancing Role of Mandatory Parental Leave
2016 (English)Report (Other academic)
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
anti-discrimination, adverse selection, parental leave, efficiency
Research subject Economics
IdentifiersURN: urn:nbn:se:uu:diva-294544OAI: oai:DiVA.org:uu-294544DiVA: diva2:930499