Prof. Dr. Kurt Schmidheiny, Anja Roth

Angewandte Ökonometrie

Research Objectives
The narrowing of the gender gap in earnings has been one of the major advances in society over the past decades. However, the gender earnings gap still widens substantially with age, especially in the 15 to 20 years after leaving school (Goldin, Kerr, Olivetti, and Barth, 2017). It has been documented that the birth of the first child has a strong and persistent effect on women's life cycle earnings patterns, whereas it leaves those of men largely unchanged. In this, the differential impact on lifetime earnings might adversely affect women in their pension payments and savings compared to men. It is therefore crucial to understand whether the differential is a deliberate preference-based choice or whether it is brought about by obstacles hindering women to stay attached to the labor market. Understanding how the costs of staying attached to the labor market are affected by institutions such as childcare facilities will contribute to a better understanding of this question and is the main objective of this project.

In this project, we establish the gender earnings gap brought about by the birth of the first child for Switzerland. Additionally, we extend previous studies by evaluating the effect of the presence of childcare on the gender earnings gap. 

We contribute to a better understanding of the gender earnings gap by studying whether childcare policies attenuate the earnings drop which women experience after the birth of their first child. We propose that the institutional environment is a major determinant of female earnings and employment patterns during their early to mid-30s. This proposition is consistent with Olivetti and Petrongolo (2017). They observe that the drop in female earnings is less pronounced in France and in Scandinavian countries, and argue that this might be related to the availability and costs of childcare. The institutional setting in the canton of Bern allows us to bring causal evidence to this question. Childcare facilities have only become more prevalent in the past 20 years. Administrative data on individuals' earnings together with a staggered opening of childcare facilities across municipalities in the canton of Bern allow us to compare child penalties of mothers who do not have a childcare facility in their municipality of residence at the time of birth of their first child to child penalties of mothers who do. 

Completed steps
For the empirical analysis, we rely on the exact opening date of each childcare facility in the canton of Bern. This information is not centrally collected and we had to contact every facility individually. Until July 2019, we have been able to retrieve the information for 47 out of 72 municipalities with childcare facilities in 2015. Based on this sample, we have written a first draft of the paper. We are currently in the process of including the remaining municipalities into our analysis.

Results
Our results suggest that institutional factors, namely childcare facilities, matter for mothers' choices after the birth of their first child.

We find that if there is a childcare facility in the municipality of residence at the time the first child is born, the long run child penalty decreases by 13 percent, i.e., from 83 percent if there is no childcare to 72 percent if there is. Furthermore, we are able to study empirically how the availability of childcare and financial support interact with one another because many municipalities in the canton of Bern introduce subsidies some time after the opening of a childcare facility. We find that the effect of childcare without subsidies is only significantly different from zero in the three years following the birth of the first child and has no longer term effect. With subsidies, however, we find a persistent reduction of the gender earnings gap of 20 percent. Furthermore, we find that the effect of childcare on maternal labor supply is stronger for mothers at the bottom of the earnings distribution.

Publications
Once the remaining municipalities are included, we will publish a working paper and submit the paper to a specialized peer reviewed academic journal.

Presentations and conferences
The project was presented at the fall meeting of the WWZ Förderverein on 24th of September 2019. We also had the opportunity to present the project to the Arbeitgeberverband beider Basel. In the future, we are further going to present the project at academic conferences.