Does Public Spending on Parental Leave Benefits Promote Child Health? Evidence from Panel Data Analyses of OECD Countries

Abstract

ABSTRACT Parental leave is one of the essential social policies that are at the center of welfare state development and family policies of countries. The components of parental leave policies is twofold; a) duration component (parental leave period): job protected leave period as the number of weeks after or before the child birth b) spending component (parental leave benefits): public financial support as cash benefits that are paid when parents are in the parental leave period to care their children. They are a set proportion (replacement rates) of earnings and replacement rates vary across countries. The previous literature on the cross-country relationship between parental leave policies and child health outcomes has so far focused on the efficacy of parental leave period and no cross-country analysis has been performed on the efficiency of the spending component of parental leave policies. Shedding light on this issue for the first time, this paper has surprisingly found an insignificant correlation between parental leave benefits and child health outcomes across the OECD countries and this empirical finding is robust to using different indicators for child mortality, to different econometric specifications and estimation techniques in different subsamples. Paper further discusses about the possible reasons of this inefficiency linking crowding out effect of traditional social policies over new family policies considering possible failures of electorally accountable governments. JEL Classification: I130; I380; H510. Key Words: Social Policy; Public Spending; Parental Leave Benefits; Child Health; OECD; Panel Data Analysis.