Anti-discrimination Legislation and the Efficiency-Enhancing Role of Mandatory Parental Leave

Arbeitspapier

We study a setting where anti-discrimination legislation gives rise to adverse selection in the labor market. Firms rely on nonlinear compensation contracts to screen workers who differ in their family/career orientation. This results in a labor market equilibrium where career-oriented workers are offered an inefficiently low duration of parental leave. In addition, family-oriented workers are offered lower wages as compared to their equally skilled career-oriented counterparts. We demonstrate the usefulness of mandatory parental leave rules in mitigating the distortion in the labor market and derive conditions under which a Pareto improvement is possible. We also characterize the optimal parental leave policy and highlight the possibility for parental leave legislation to eliminate the wage penalty of family-oriented workers by supporting pooling employment contracts.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 5917

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Wage Level and Structure; Wage Differentials ; Labor Standards: Workers' Rights
• Subject: anti-discrimination ; adverse selection ; parental leave ; efficiency

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bastani, Spencer ; Blumkin, Tomer ; Micheletto, Luca
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/144952
• Last update: 10.03.2025, 11:42 AM CET