Maternity Leave, Effort Allocation, and Postmotherhood Earnings

Abstract

Women with children earn less than women without children. I study this wage gap using a dynamic model of human capital accumulation with endogenous time and effort allocation between household and market activities. Selection into motherhood does not drive the gap in hourly wage. I decompose this gap into forgone human capital and changing effort at work. Human capital depreciates as a result of maternity leave and accumulates at a lower rate after childbirth because of a reduction in work hours. Effort at work does not decline after childbirth. Reduced human capital accumulation explains the entire postmotherhood loss in hourly wage.