Paid parental leave and long-term outcomes of children—Quasi-experimental evidence from former East Germany

Abstract

This study investigates the impact of an increase in paid parental leave from six to twelve months on children’s long-term outcomes. Our setting—former East Germany—is characterized by high maternal labor market participation and a universal supply of standardized childcare. It thus mitigates identification issues such as selection into the labor market and provides a clear counterfactual to maternal care. Applying a difference-in-differences design and using representative survey data, we exploit the specific timing of the parental leave reforms in 1976 and 1986. We find significant and robust positive effects on children’s life satisfaction in adulthood for both reforms. Effects on gross wages are positive but not robust across different specifications. A heterogeneity analysis by gender reveals positive effects on trust and health among males.