Norway: Fertility & Long Term Earnings

Core Inquiry: The persistent question, “Why do women earn less than men post-childbirth?” has sparked extensive research and debate.
Traditional Belief: It’s widely held that the gender pay gap significantly widens after women become mothers.
This Study’s Focus: Moving beyond surface-level analysis, this research delves into the intricate dynamics between childbirth and labor market outcomes.

The Challenge: Measuring the impact of having children on labor market outcomes is complex, as fertility is intertwined with other labor market factors.
Earlier Techniques: Previous studies primarily utilized event-study approaches, drawing comparisons between women who have children at different times.
Innovative Approach: This research leverages data from in vitro fertilization (IVF) treatments in Norway, providing a novel perspective.

Traditional vs. New Insights: Where traditional studies using event-study approaches find a significant earnings drop for women post-childbirth, this paper, using IVF data, suggests the decrease is much smaller.
The IVF Angle: By employing data on IVF treatments, the study explores how successful fertility treatments can be used as an instrument to estimate the causal effect of fertility on earnings.
Redefining the Gap: The findings suggest that the gender pay gap post-childbirth might be less about women earning less and more about partners potentially earning more post-childbirth.

Policy Relevance: The nuances in understanding the gender pay gap are crucial for developing effective policies. If the gap is less about women earning less post-childhood and more about partners earning more, traditional solutions like promoting female labor supply might not effectively close the gap.
Broader Implications: These findings challenge conventional narratives and provide a basis for rethinking existing policies and approaches to gender equality in the workplace.

Event Study vs. LPR-IV Model: The paper compares the standard event-study model with the LPR-IV (Lundborg et al., 2017) model. While the event-study model finds a significant drop in women’s earnings post-childbirth, the LPR-IV model, which uses IVF as an instrumental variable, shows minimal long-term effects on women’s earnings.
Event-IV Model: A novel approach in this study is the event-IV model, which combines elements of the event-study and instrumental variable approaches. It shows a moderate long-term earnings effect on mothers, smaller than what the event-study model suggests, and a potential increase in partners’ earnings post-childbirth.

Selection into Fertility: One of the critical insights from the study is how women time their fertility, often choosing to have children as their earnings growth starts to plateau.
Impact on Estimates: This timing issue leads to an overestimation of the motherhood penalty in standard event-study models, as they fail to account for this dynamic selection into fertility.
Robustness Checks: The study performs various robustness checks, including controlling for pre-IVF earnings, evaluating the role of mental health and divorce risk, and using an extended income definition, all confirming the core findings.

Need for a Refined Lens: The research underscores the need to look beyond traditional methodologies and assumptions when examining the gender pay gap.
Implications for Policymakers: For policymakers, these findings stress the importance of a more nuanced understanding of the gender pay gap and the role of parenthood in shaping labor market outcomes.
Moving Forward: The study’s fresh perspective opens new pathways for research and policy formulation, aiming towards more equitable labor market dynamics for both women and men post-childhood.