This paper analyses the use of parental leave after birth of a child for
working mothers. Even though employment rates of women in industrialized
countries are rising, women continue to assume the primary
responsibility for caring for young children after they are born.
Therefore it is interesting and important to understand what factors
account for women's decision to use or not use parental leave. The
behaviour of mothers is conceptualized as a series of three decisions
taking place after the compulsory period of maternity leave. The first
decision is to retain a relationship with the pre-birth employment or to
leave the labour force. Women who do not quit their employment, make a
second choice: to return to work immediately or to take parental leave
for a fixed period of time, which guarantees them the right to return to
work. Finally at the end of parental leave, women decide whether to
return to work or to quit their job. The empirical analysis is performed
on administrative data provided by the Grand Duchy of Luxembourg. In
order to account for the sequential nature of the decisions, the model
for nested dichotomies (Fox, 1997) has been used. The result lend
partial evidence to economic reasoning about women's decision making.
Salary-related opportunity cost seems to be particularly important in
the first and third decision, but not in the second. There are also
interesting differences based on the nationality of the women.
JEL Classification: J16, J13, J22
Keywords: work-family reconciliation, parental leave, labour supply of women