Title page

Contents

Abstract 3

1. Introduction 4

2. Institutional Background 8

3. Data 9

3.1. Data Source 9

3.2. Internal and External Substitutes 11

3.3. Outcome Variables 11

3.4. Sample Selection and Descriptive Statistics 13

4. Firms' Hiring and Separation Responses to Motherhood 14

5. Effects of Extending Parental Leave Benefits on Mothers and Firms 19

5.1. Empirical Strategy 19

5.2. Effects of Extended Parental Leave Effects on Mothers and Firms 21

5.3. Effects Heterogeneity by Availability of Internal and External Substitutes 26

5.4. Effects on Replacement Hiring 28

6. Effects on Hiring Discrimination Against Women 29

7. Discussion and Conclusion 31

References 34

Appendix (For Online Publication) 38

Table 1. Summary statistics and balancing 15

Table 2. Summary of event study estimates 25

Figure 1. Firms' hiring and separations around childbirth 16

Figure 2. Firms' excess hiring by internal and external substitutes 17

Figure 3. Firms' hiring composition around childbirth 18

Figure 4. Effects on mothers' employment at their pre-birth firm by pre-birth earnings sextile 22

Figure 5. Event study of parental leave reform effects on mothers' and firms' outcomes 24

Figure 6. Short-term effects by internal substitutes 26

Figure 7. Effect of the parental leave reform on hiring in the replacement period 29

Figure 8. Longer-term effects on hiring and wages of young women 30

Table A.1. Comparison of mothers and firms in analysis sample with excluded observations 47

Table A.2. Summary statistics and balancing-upper two pre-birth earnings terciles 48

Table A.3. Summary of event study estimates (including lower earning mothers) 49

Table A.4. Event study estimates by internal substitutes 50

Table A.5. Event study estimates by external substitutes 51

Table A.6. Summary event study estimates for mothers - interaction with internal substitutes 52

Table A.7. Summary estimates by pre-birth firm size 53

Table A.8. Summary event study estimates for larger firms 54

Table A.9. Summary event study estimates for firms - interaction with internal substitutes 55

Table A.10. Summary event study estimates for firms - absolute outcomes firm 55

Table A.11. Summary event study estimates for West and East Germany 56

Figure A.1. Illustration of benefits pre-reform and post-reform 38

Figure A.2. Sample selection process 39

Figure A.3. Firm and workgroup size of analysis sample 40

Figure A.4. Firms' hirings and separations by birth semester 40

Figure A.5. Firms' hiring shares around childbirth 41

Figure A.6. Specification checks 42

Figure A.7. Return to pre-birth firm, by availability of internal substitutes 43

Figure A.8. Event study of parental leave reform effects on mothers', different workgroup size definitions 43

Figure A.9. Combination of firm and workgroup size 44

Figure A.10. Longer-term effects of hiring childless women under 30 by internal substitutes 44

Figure A.11. Longer-term effects of hiring of young women-firms without births 45

Figure A.12. Hiring patterns of women over time 46