Causal effects on employment after first birth — A dynamic treatment approach

• The causal effect of first childbirth is estimated by a dynamic treatment approach.
• The causal effect of childbirth on female labor supply is large and persistent.
• It decreases over the first five years as the child grows, but does not level off.
• The employment loss is particularly pronounced for medium-skilled mothers.
• We find a significant reduction in the employment loss over time.

The effects of childbirth on future labor market outcomes are a key issue for policy discussion. This paper implements a dynamic treatment approach to estimate the effect of having the first child now versus later on future employment for the case of Germany, a country with a long maternity leave coverage. Effect heterogeneity is assessed by estimating ex post outcome regressions. Based on SOEP data, we provide estimates at a monthly frequency. The results show that there are very strong negative employment effects which are causally due to childbirth. Although the employment loss is reduced over the first five years following childbirth, it does not level off to zero. We find a significant reduction in the employment loss over time.