Parental Benefits and Employment and Fertility Dynamics.” University of Wisconsin-Madison, and National Bureau of Economic Research

was written while I was a National Fellow at Hoover. I gratefully acknowledge Irene Andersson's work in obtaining and documenting the income and tax data used in this paper. I thank an anonymous referee, John Kennan, Arik Levinson, J. Karl Scholz, T. Paul Schultz, and participants at the University of Quebec at Montreal for useful comments. This paper investigates the effect of parental benefits on the timing and spacing of births and on employment dynamics of Swedish women. Using microdata on wages and incomes, I estimate a reduced-form multistate duration model of the bivariate life cycle fertility and employment process. The paper provides an example of the application of empirical procedures to develop and evaluate multistate hazard models. Estimation results are mixed with estimated wage effects generally consistent with theoretical predictions while estimated effects of the benefits are not. The evaluation procedures offer valuable diagnostic information and suggest several avenues for future research