Domestic Equality and Marital Stability Does Paternity Leave affect Divorce Risk?∗

Preliminary draft- please do not cite In 2001, a new reform was adopted in Iceland, guaranteeing fathers three months paternity leave, implemented in stages. Parents who had a child in 2001 were given the option to add one month of paternity leave to the existing 6 month long parental leave which they had forgone if not used by the father while parents who had a child before were were not able to do this. This created large economic incentives for parents to involve fathers in caring for their children during their first months. In this paper we use the precise timing of the introduction of the paternal quota to evaluate the causal effects of paternity leave on marital stability. The results are obtained using detailed register based panel data, comparing families who had a child just before or just after the reform. Spouses who are entitled to paternity leave are less likely to divorce during the first years of the child’s life, the period where most divorces take place. Furthermore, we also find that the reform reduced the earnings gap between couples