The paper studies the short and medium run employment effects of a substantial change in the parental leave benefit system in Germany. In 2007, a means-tested parental leave benefit system that had paid benefits for up to two years was replaced by an earnings related benefit system which paid benefits for about one year. We find that the reform speeds up the labor market return of mothers after the child has turned one year old and the benefit expires. This response is found for all women, independent of whether they would have been eligible for benefits under the old benefit system. In particular, women who are strongly attached to the labor market respond to the reform. |
