Having it all? : employment, earnings and children

Sweden boasts high fertility and high female employment. However, part-time employment is very prevalent. There is a notable gender gap in both wages and earnings, which widens substantially after women have children. In this paper we study the effect of family policies on female employment, fertility and the gender wage gap. To this end, we develop a structural, life cycle model of heterogeneous households which features endogenous labor supply, human capital accumulation, fertility and home production. We find that family policies, such as subsidized daycare and part-time work options, promote maternal employment and fertility. Part-time work contributes greatly to the widening of the gender wage gap following the arrival of children. However, restricting part-time work options would lower maternal employment, and thereby also widen the gender wage gap.