Job Market Paper

This paper studies the interplay between paid parental leave policies (PPL), fertility, and child human capital, highlighting heterogeneous effects across the income and education distribution. Using micro-level data, I show that the introduction of PPL in the U.S. is associated with an increase in fertility but a decline children’s long-term outcomes. To rationalize these findings, I develop a heterogeneous-agents model that combines fertility and parental investment decisions feeding into a function of human capital that accumulates across multiple stages of childhood. Calibrated to U.S. data, the model replicates between 40 and 80\% of the fertility response estimated in my empirical analysis. I then use it as a policy laboratory to study a more generous paid leave scheme and show that fertility responses vary across the income and education distribution, generating a quantity–quality trade-off among families facing binding budget constraints. Finally, I show that in the absence of fertility responses, PPL would raise child human capital, underscoring the central role of fertility in shaping policy effects.