Edward Conard

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  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
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Upside of Inequality Oxford Unintended Consequences

AI Summary. A study of 60 years of Austrian family policy reforms, including parental leave and childcare subsidies, estimates these policies had virtually no effect on narrowing the gender gap in earnings, which remains roughly 40%. The authors argue gender convergence is shaped more by labor market conditions and evolving gendered preferences and norms than by government intervention.

Camille Landais National Bureau of Economic Research
Date Posted:
Is Database:
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Austria’s extensive family policy reforms over 60 years have not narrowed the gender pay gap. The raw gender gap in earnings remains roughly 40% despite a 30 percentage point decrease from 1953 to 2017.

Do family policies narrow the gender gap in earnings?

Core argument: Austria's gender gap in earnings fell by about 30 percentage points from 1953 to 2017, yet the study finds that parental leave and childcare subsidy expansions had virtually no impact on that convergence.

Despite Austria's extensive family policy reforms over the past 60 years, including generous parental leave and childcare subsidies, the gender pay gap has not significantly narrowed. The Austrian gender gap in earnings decreased by about 30 percentage points from 1953 to 2017, yet these policies had virtually no impact on gender convergence. The raw gender gap in earnings remains roughly 40%, with a female labor force participation rate of about 55% as of 2018. The study suggests that gender convergence is more influenced by labor market equilibrium and evolving gendered preferences and norms than by government interventions. This indicates that even substantial policy expansions may not effectively address gender inequality if underlying societal norms and preferences remain unchanged.

Takeaways by Macro Roundup® AI

  1. Austria's gender gap in earnings fell by about 30 percentage points from 1953 to 2017, yet the study finds that parental leave and childcare subsidy expansions had virtually no impact on that convergence.
  2. Austria's raw gender gap in earnings remains roughly 40%, with female labor force participation at about 55% as of 2018, despite 60 years of extensive family policy reforms.
  3. The study attributes gender convergence in Austria more to labor market equilibrium and evolving gendered preferences and norms than to government interventions, suggesting substantial policy expansions may not reduce gender inequality when underlying norms persist.

Henrik Kleven, Camille Landais, Johanna Posch, Andreas Steinhauer and Josef Zweimüller, "Do Family Policies Reduce Gender Inequality? Evidence from 60 Years of Policy Experimentation," National Bureau Of Economic Research, November 2020, https://www.nber.org/papers/w28082

Their conclusion, "....We find that parental leave policies have had negative short-term effects on female labor market outcomes, but no long-term effects.... Our main conclusion is simple and striking: The enormous expansions of parental leave and child care subsidies have had virtually no impact on gender convergence..... The short-term effects are relatively small and largely inconsequential for the evolution of aggregate gender inequality. More surprisingly, we also find that publicly provided and heavily subsidized child care has had no effect on the secular decline in gender inequality. This stands in contrast to the strong cross-country correlation between child care subsidization and gender gaps, while within-country quasi-experimental studies of specific reforms have led to mixed results. Broadly speaking, our evidence is consistent with the ideas exposed in Goldin (2014), arguing that gender convergence relies less on government intervention than on equilibrium features of the labor market. Our work is also consistent with the notion that gender convergence reflects the evolution of gendered preferences and norms.....This underlines the need for furthering our understanding of the formation of preferences and social norms regarding the family-career choices of men and women, and to account for their potential interaction with public policies. Endogenous preferences may create multiple equilibria and tipping points, whereby small changes in policies can have large effects on gender inequality. Conversely, as seems to be the case in Austria, gendered preferences can be sufficiently strong that gender gaps do not respond to even very large expansions of policies..."

Do Family Policies Reduce Gender Inequality? Evidence from 60 Years of Policy Experimentation: Extended Excerpt Image 1

Austria has significant policy interventions into family policy, "...In the aftermath of World War II, there was no system of parental leave in Austria. Women were simply entitled to Mutterschutz, a maternity insurance period of 8 weeks following delivery, akin to sick leave. In 1961, a paid and job-protected maternity leave of 52 weeks was introduced. Since then, the country has implemented four large reforms of its parental leave policies (in 1990, 1996, 2000, and 2008), which have considerably expanded the generosity and scope of parental leave. Today, the Austrian parental leave system stands out as one of the most generous in the developed world. Currently, parents are entitled to up to about 35 months of paid parental leave if that time is shared, or up to about 28 months if one parent takes the time alone. The replacement rate is relatively high: the median replacement rate is about 40% of net earnings. The take-up of parental leave comes with a job-protection guarantee of 24 months. The receipt of parental leave benefits is not subject to any work eligibility requirement prior to child birth..."

Those programs have had the following impact on the wage gap, "... we rely on exceptional administrative data covering the labor market and birth histories of Austrian workers from 1953 to 2017. During this era, the Austrian gender gap in earnings fell by about 30 percentage points, while public policies supporting families with children were introduced and greatly expanded...."

Though their Figure 9 was strongly illustrative of the null effect they found (here in terms of childcare expansion)“…We start in Figure 9 by presenting the results for nursery care expansions. In panel (a), we focus on women who are one year before birth (t = −1), and report their estimated earnings in control municipalities vs treated municipalities, from five years before, to five years after the expansion shock. The graph first shows no evidence of a differential trend in earnings before expansion. This helps alleviate concerns that the supply shock was an endogenous response to the evolution of female labor market outcomes in treated municipalities. Secondly, the graph reveals that the expansion had no effect on the outcomes of women prior to giving birth. In other words, the increased access to child care did not lead to anticipatory effects among women about to have children…”

Bottom line more generous family policy extension over 50 years has had no impact on gender convergence “…Our main conclusion is simple and striking: The enormous expansions of parental leave and child care subsidies have had virtually no impact on gender convergence…”That implies the gap is a revealed preference, “…Broadly speaking, our evidence is consistent with the ideas exposed in Goldin (2014), arguing thatgender convergence relies less on government intervention than on equilibrium features of the labor market. Our work is also consistent with the notion that gender convergence reflects the evolution of gendered preferences and norms…”

The NBER study mentioned in WSJ uses several natural experiment resulting from family policy reforms (childcare and parental leave expansions) in Austria. For context this is what Austria looks like today, "...The raw gender gap in earnings is roughly 40% and the female labor force participation rate is about 55% (in 2018)..."

Ed Comment:“….Blog post (….but no posting until my kid gets into college. …thank you Steve for supporting that crime.) The Austrian parental leave system stands out as one of the most generous in the developed world. Parents are entitled to up to about 35 months of paid leave The median replacement rate is about 40% of net earnings. The receipt is not subject to any work eligibility requirement prior to child birth. Our main conclusion is simple and striking: The enormous expansions of parental leave and child care subsidies have had virtually no impact on gender convergence. Our work is consistent with the notion that gender convergence reflects the evolution of gendered preferences and norms….”

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