The effects of children on mothers' employment and earnings : evidence from Spain

Using a large and rich data set from administrative sources, we study the effects of children on mothers’ employment and earnings in Spain. By being able to pinpoint the event of multiple births along a twenty-year panel of women’s work history, we address two methodological hurdles in this research: the omitted-variable problem and concerns about twins as a good instrument for family size. We find that the effects of fertility on mothers’ labor outcomes differ by level of education. Women with only compulsory education experience falls of 17 percent in employment and 15 percent in earnings, increased duration of non-employed spells, and reductions in the likelihood of holding a secondary job or chaining contracts within a certain employment spell. Among more educated women, the employment rate drops by a mere 4 percent and earnings increase slightly in some cases. Nonetheless, a relatively higher employment rate of more educated mothers, besides unexpected changes in family size, involves costs in terms of working conditions, like holding temporary contracts. Our results indicate that mothers in general have a hard time regaining employment as revealed by the sharp increase in the take-up rate of unemployment insurance benefits around the third month after the birth. Finally, we are able to obtain some results for the impact of family size on the labor supply of a second earner (husband) in the household. For instance, we find that second earners tend to compensate for mothers’ income diminution.