Love Your Leave, Don't Leave Your Love! Paid Parental Leave and Children's Living Arrangements

This paper examines the causal effect of a substantial change in the German paid parental leave program on early childhood living arrangements. Our identification strategy draws on the unanticipated introduction of this reform in 2007. Using data from the Micro Census 2005-2012, we find that the reform increased the probability that a newborn child lives with non-married cohabiting parents in the first years of life. This effect results from a reduced risk of growing up with a single mother rather than from a shift away from marital unions to non-married parental cohabitation. We argue that our estimates are in line with the hypothesis that the reform incentivizes paternal involvement in childcare and thus strengthens fathers’ attachment to their newborns. We demonstrate that the negative effect on single parenthood persists beyond the benefit take-up period. Interestingly, boys and girls are differently affected by the reform: particularly fathers of daughters appear to join their families after the reform, reducing a prior disadvantage of daughters.