Time Out for Childcare: Signalling and Earnings Rebound Effects for Men and Women

ABSTRACT: The wage cost of time out of the labor force for childcare is important in order to understand the functioning of labor markets and for public policy. This paper reviews the literature and identifies several limitations. Using employment records of a large Swedish company over the period 1983‐88, we demonstrate an alternative approach for estimating earnings effects and find a year out costs 1.7 percent of earnings for a woman and 5.2 percent for a man. This large effect for men raises questions of signalling costs. For both men and women, earnings‘'rebound'’for time out in the more distant past.