Parental Leave and Long-Term Life Satisfaction of Children - Quasi-Experimental Evidence from Former East Germany

This study investigates the impact of an increase in paid parental leave — twelve instead of five months — on children’s long-term life satisfaction. Our setting, former East Germany, features high labor market participation of mothers and universal supply of standardized childcare. It thus mitigates identification issues such as selection into the labor market and provides a clear counterfactual to maternal care. Applying a difference-in-differences design we exploit the specific timing of parental leave reforms in 1976 and 1986. We find a significant and robust positive effect on now-adult children’s life satisfaction, and show that long-run subjective well-being can already be impacted by policies during the first year of an individual’s life.