Work and Wage Dynamics around Childbirth

In this paper, we investigate how the wage processes of women who are well established in the labour market are affected by having children. We estimate a flexible fixed‐effects wage regression model extended by post‐childbirth fixed effects. We use register data on West Germany, and we exploit the expansionary family policy during the late 1980s and 1990s for identification. On their return to work after childbirth, the wages of mothers drop by 3–5.7 per cent per year of leave. We find negative selection back to full‐time work after childbirth. We discuss the policy implications regarding statistical discrimination and the results concerning the family gap.