Gaetano Basso (Bank of Italy)
Maria De Paola, Salvatore Lattanzio and Matteo Paradisi
We study whether workplace flexibility is a key driver of the child penalty. We exploit the sharp and heterogeneous diffusion of work-from-home (WFH) contracts after COVID-19 in a difference-in-differences framework. Our analysis combines administrative data on the universe of Italian WFH contracts with matched employer–employee records, administrative mother–father links, fertility records, and firm-level balance sheets. Greater exposure to flexible work arrangements substantially reduces mothers’ post-childbirth earnings losses, primarily through higher weeks worked, lower part-time incidence, lower take-up of parental leave, and improved career progression. The gains are larger among younger, lower-earning and commuting mothers, consistent with flexibility relaxing time and contractual constraints where they are most binding. IV estimates indicate that holding a WFH contract offsets a large share of the child penalty. While fathers’ own earnings do not respond to flexibility around childbirth, fathers’ exposure to flexible work reduces mothers’ earnings losses by a comparable magnitude. This pattern points to household-level time constraints—rather than mother-specific constraints—as a central mechanism for the child penalty, and suggests a more limited role for explanations based primarily on employer discrimination or gender norms. Consistent with this interpretation, fertility—a joint household decision—increases for mothers more exposed to flexibility, because flexibility lowers the labor market cost of the marginal child. A counterfactual exercise shows that the life-cycle widening of the gender earnings gap would have been 13% smaller under current WFH diffusion and up to 26% smaller if all remotable jobs had adopted flexible arrangements.