Asia-Kim Francavilla (Stanford University)
This paper examines how the peer leave environment shapes mothers' post-birth earnings trajectories. I exploit quasi-experimental variation from the 2007 German parental leave reform, which replaced a means-tested flat-rate system with earnings-related benefits, significantly increasing the propensity for mid-to-high earning mothers to take extended leave. By comparing mothers who gave birth alongside coworkers eligible for these expanded benefits with those whose coworkers were ineligible due to pre-reform birth timing, I isolate the impact of coworker absence while holding the focal mothers own incentives constant. A one standard deviation increase in coworker eligibility raises a mothers earnings by 5.7 percent, with effects emerging two years after childbirth and persisting for at least seven years. These gains occur entirely at the intensive margin, with no effect on employment probability. This is consistent with a tournament mechanism in which coworker absences reduce workplace competition and create advancement opportunities for mothers who return earlier. Extending the analysis to other workgroup members reveals a striking gender asymmetry: male coworkers capture a premium of about 2 percent, while female coworkers without children see no significant gains. These findings demonstrate that maternal earnings trajectories are shaped by firm-side competitive dynamics and highlight a channel through which parental leave policies may unintentionally influence gender earnings gaps.