In this paper we use a rich population based register data set for Norway to identify the long term effect on mother’s labor market outcomes and children’s educational attainment, ability and labor market outcomes by exploiting a reform in paid and unpaid maternity leave. We use a non-parametric regression discontinuity design comparing children born before and after the reform. Unlike previous studies we can narrow down the treatment group to those who were eligible for the reform and to the compliers. We find a positive impact of the reform on mother’s months of leave in the short run and employment and income two and five years after giving birth. For children we find a significant, positive effect on dropout rates from high school, college attendance, years of education, teenage pregnancy and IQ score. We find that children benefit more from the reform if parents have lower education. The effects are stronger when families live closer to grandparents and when municipality child care coverage is low. We also measure effects on older siblings to sort out mechanisms and find some indication that also older siblings benefited from the reform. This indicates that mother as a role model is important.
(Joint paper with Pedro Carneiro, University College London and Katrine Løken, University of Bergen)