Published in: Labour Economics (Forthcoming). (with Elisabeth Artmann and Bas van der Klaauw)
Women in the Netherlands face an earnings penalty of 47% after the birth of their first child, which is in line with previous studies. We construct several measures of relative within-household earnings potential to assess the importance of household specialization based on comparative advantage. The Netherlands offers a particu- larly interesting setting for studying household specialization since employees basi- cally face no restrictions if they want to reduce their working hours. We find that women with a higher earnings capacity than their partner face lower earnings losses after childbirth and reduce their labor supply less than women with a low relative earnings potential. Yet, men's labor market trajectories are largely unaffected by parenthood irrespective of their relative earnings potential in the household. There is thus no evidence that households divide market work and child care based on comparative advantage or bargaining power. We provide some evidence that women with high earnings potential rely more on formal child care.