Wage effects of extending parental leave in Canada
Authors: Marjolaine Gauthier-Loiselle
This paper estimates the incidence of extended maternity leave benefits on relative wages. I use the 25 weeks increase in paid parental leave in Canada in 2000 to compute a differences-in-differences estimator of the change in the relative average hourly wage of women of childbearing age. Using the Survey of Labour and Income Dynamics (SLID), I compute estimates with and without correction for sample selection and individual heterogeneity. In line with previous research, I find no statistically significant effects in ordinary least squares specifications. However, using a method that corrects for sample selection and unobserved heterogeneity, I find evidence that the extension of parental leave benefits decreased the relative hourly wage of women of childbearing age by approximately 1% compare to older women. However, this decrease in the relative hourly wage doesn’t translate into a statistically significant effect on the relative annual earnings of women of childbearing age.
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