The Impact of Mandated Maternity Benefits on the Gender Differential in Promotions: Examining the Role of Adverse Selection

This paper examines how mandated maternity leave policies impact the gender gap in promotions. I present a model of the gender gap in promotions where firms must choose whether to invest in the training of their employees, but they are uncertain about their employees' future choice of hours of work. If women are more likely than men to reduce their hours of work during childrearing years, firms will invest less in women early in their careers, leading to a gender gap in promotions. In the presence of asymmetric information about workers' future preferences, mandated maternity leave policies can exacerbate this gap. Using the Multi-City Study of Urban Inequality and the Panel Study of Income Dynamics, I test the predictions of the model in the context of the Family and Medical Leave Act of 1993 (FMLA). Women hired after the enactment of the FMLA are five percent more likely to remain employed but eight percent less likely to be promoted than those who were hired before the FMLA. Furthermore, I find evidence suggesting that information asymmetry, in addition to selection, is driving the increase in the gender gap in promotions.The_Impact_of_Mandated_Maternity_Benefits_on_the_Gender_Differential_in_Promotions.pdf: 567 downloads, before Oct. 1, 2020