Reducing the gender gap in parental leave through economic incentives? – Evidence from the gender equality bonus in Sweden

Abstract

Using a regression discontinuity design, I evaluate an internationally unique policy in Sweden that rewarded equal division of parental leave with a cash bonus. The policy caused a small but significant reduction in the difference in days of leave between the parents. But since parent couples responded in different directions depending on the gender of the person with the lower uptake, the average effect on the mother-father difference in uptake was insignificant. Expectedly, given this result, the bonus did not affect average gender differences in earnings or indicators of later childcare responsibility. However, mothers who lowered their uptake of parental leave in response to the bonus displayed positive point estimates with regard to earnings while mothers who increased their uptake displayed negative estimates. This indicates that we cannot rule out a potential link between the length of parental leave and later allocation of time between home and market production. While the bonus did not affect average gender differences in parental leave and earnings, a key finding is that parents’ division of parental leave can be affected by economic incentives, suggesting that better calibrated bonus programs have potential to be useful policy tools.