Causal Effects of Maternity Leave

Sarah Vollandt Frederiksen

Student thesis: Master thesis


Equal labor market opportunities and how maternity and parental leave affect these is an important and well debated subject. Maternity leave was originally introduced to ensure the health of new mothers and their newborn children. During the years, it became more of a political matter and a tool to ensure mothers’ affiliation to their workplace. In March 2002, parental leave in Denmark was increased from 8 to 32 weeks and women could now take paid leave for up to 50 weeks instead of 26 weeks. The purpose of the 2002 law change was to support family life and work life balance. Previous studies show that taking leave for longer than six months seems to have adverse effects on women’s labor market opportunities. This thesis seeks to find causal effects on labor market opportunities for newly graduated women, as a result of the new leave reform in Denmark, introduced in 2002. Human capital theory and demand and supply theory will be used to describe which mechanism will be expected on the labor market when the leave period is extended. Furthermore, the difference-in-difference method applied by ordinary least squares, is used to estimate the differences in labor market opportunities between newly educated women and men before and after the 1 st of January 2002. I have used a rich panel dataset from Statistics Denmark containing observations from 1999-2004 about education, graduation year, salary, length of full time and part time unemployment, municipality place of residence, age, and number of children. First, human capital becomes less valuable for women when they are away from the labour market for a longer period because the return of education decreases. Supply and demand theory says that longer leave taken by women makes the demand for female labour decrease relative to the demand for male labour. This is because expectations are that they will be missed in production, be unprofitable for some years, and maybe accumulate less human capital in their work-life than men. Secondly, there appear to be mixed effects on yearly salary and part time unemployment for newly graduated women when the leave period is extended, which makes it difficult to prove any effects. The length of full-time unemployment for women has decreased by about half a week relative to the full time unemployment for men, after the reform was introduced. This indicates that extending the leave period may have small positive effects for newly educated women by decreasing the time of full-time unemployment and not any negative effects.

EducationsMSc in Business Administration and Mathematical Business Economics, (Graduate Programme) Final Thesis
Publication date2022
Number of pages74
SupervisorsHerdis Steingrimsdottir