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Associate Professor Maria Racionero

Associate Professor Maria Racionero

The labour market impacts of parental leave

27 November 2017

Associate Professor Maria Racionero of the ANU Research School of Economics is working on research that will help shed more light on how parental leave impacts on the supply and demand for labour.

Her paper, titled “On the effect of parental leave duration on unemployment and wages” was recently published in the highly regarded Economics Letters journal.

The paper, co-authored by Dr Elena Del Rey and Dr Jose Silva from Universitat de Girona, explores the effect of parental leave duration on wages and unemployment. It focuses on the job creation channel and shows that the effects of parental leave depend on the net benefit of the policy, relative to bargaining power, of both workers and firms.

“Parental leave duration differs significantly across OECD countries. This paper incorporates parental leave into a search and matching labour framework to examine the impacts of parental leave duration on wages and unemployment rates,” said Associate Professor Maria Racionero.

The paper highlights that workers and firms both enjoy benefits and incur losses when the worker is on leave. The firm incurs a productivity loss but also saves the cost of opening a vacancy, since the worker is expected to return to the job. The worker enjoys a benefit - the value of time on leave and associated payment, if any – which needs to be compared to the alternative option of unemployment.

Associate Professor Racionero says that by examining the effects of parental leave policy through the lens of labour search and matching theory, the modern framework to study unemployment and wage dynamics, this research may help policy makers better understand the effects of parental leave.

“Parental leave entitlements have been the subject of contentious policy debates in recent years in Australia. There is however surprisingly little formal analysis of parental leave policies in modern search and matching labour models. This paper represents a first step.”

Associate Professor Racionero is now working on further research that looks at the broader impacts of parental leave policies.

“Our aim is to assess the effects of type-specific parental leave policies on both men and women. In addition, we plan to apply this model to the data on the variation of parental leave policies across countries.”

“We hope this research will help shed light on the current policy debate in Australia.”

Updated:   27 November 2017 / Responsible Officer:  Dean, Business & Economics / Page Contact:  College Web Team