Mara Buhmann (Institute for Employment Research)
The child penalty can explain the still existent earnings gap between women and men. However, less is understood about the reasons behind the child penalty. Therefore, the aim of this paper is to investigate the mechanisms behind the child penalty by analysing on the role of mothers' substitutability to her co-workers. The firm's reaction to planned absences of mothers -- whether to increase working hours of co-workers or to hire new workers -- depends on the substitutability of the leaving mother: if there are less substitutes available at the firm, the firm is more likely to hire. This may have implications for the future career and earnings growth for mothers when returning to her old workplace. Using high-quality data from Germany and including mothers' substitutability as a continuos treatment in a difference-in-difference-in-differences child penalty estimation, the results indicate that if there are less substitutes available at a firm, the child penalty is significantly higher. The paper will also include analysis on mechanisms, whether mothers with a lower substitutability are more likely to be replaced with new hires at their current firm and if they are more likely to switch firms after returning to the labour market.