The short run effects of childbirth on parents' earnings in the Baltics

Abstract

Having a child can have a heavy toll on parents' earnings, especially in the first years after childbirth, with mothers often being more affected than fathers. This is particularly true in the three Baltic states, with relatively generous parental leave benefits compared to the EU and norms encouraging mothers to care for children. I carry out an event study to estimate the effect of having a child on the earnings of both genders and find that the earnings of females reduce by half in the first calendar year after childbirth and by 20% to 33% in the second, while male earnings do not change in either period. This results in a widening earnings gap in the Baltics, more so than in several comparison countries (Denmark, Finland, Sweden, the Netherlands, and Norway), in the first two years after the birth of thefirst child.