DP20411 Family-Friendly Policies and Fertility: What Firms Have to Do With It?

• Olympia Bover Nezih Guner Yuliya Kulikova Alessandro Ruggieri Carlos Sanz
5 Jul 2025

Family-friendly policies aim to help women balance work and family life, encouraging them to participate in the labor market. How effective are such policies in increasing fertility? We answer this question using a search model of the labor market where firms make hiring, promotion, and firing decisions, taking into account how these decisions affect workers' fertility incentives and labor force participation decisions. We estimate the model using administrative data from Spain, a country with very low fertility and a highly regulated labor market. We use the model to study family-friendly policies and demonstrate that firms' reactions result in a trade-off: policies that increase fertility reduce women's participation in the labor market and lower their lifetime earnings.