Parental Benefits Improve Parental Well-Being: Evidence from a 2007 Policy Change in Germany

Mikko Myrskylä, Max Planck Institute for Demographic Research

Family policies aim to influence fertility and labor force participation, and support families. However, policy evaluations often only consider fertility and labor supply. For example, the 2007 extension of parental leave benefits in Germany is generally considered unsuccessful because changes in fertility and labor force participation were modest. However, parental well-being is also important, in itself and as a determinant of child well-being. This paper is the first to consider the effect of parental leave policies on parental well-being. We analyze the German 2007 parental benefits reform and find that the extension of benefits strongly increased parental well-being around the birth of a child. The effect is observed for first and second births and for various sub-populations. Our results cast the success of the German policy in new light. Parental leave benefits have an important direct impact on parental well-being.