Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144952
Authors: 
Bastani, Spencer
Blumkin, Tomer
Micheletto, Luca
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 5917
Abstract: 
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.
Subjects: 
anti-discrimination
adverse selection
parental leave
efficiency
JEL: 
D82
H21
J31
J83
Document Type: 
Working Paper

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