metadata: authors: 0: author: Fajardo Gonzalez,Deisy Johanna
1: author: Hasanbasri,Ardina Roosiany
2: author: Rios Avila,Fernando
count: Indonesia
docna: 0: docna: Is There a Gendered Parenthood Penalty in
            Indonesian Labor Markets?
docty: Policy Research Working Paper
abstracts: cdata!: This paper investigates the parenthood
            penalty in Indonesian labor markets, with a focus on gender
            disparities. It uses longitudinal data from the Indonesia
            Family Life Survey from 1993 to 2014 and employs a
            difference-in-differences approach with staggered adoption
            to estimate the impact of parenthood on labor market
            participation for both men and women. The results reveal
            that the birth of a child has a significant and persistent
            negative effect on women&#x2019;s employment, with the
            penalty extending up to six years after childbirth. In
            contrast, men experience only short-lived and insignificant
            changes in employment after fatherhood. The analysis further
            identifies substantial heterogeneity across different
            subgroups. Women in urban areas and those with higher levels
            of education experience larger and more prolonged penalties,
            while rural women, those with lower levels of education, and
            those with extended family support recover more quickly. The
            findings highlight the role of socioeconomic factors in
            moderating the parenthood penalty and offer critical
            insights for policies aimed at promoting gender equality in
            the labor market.
display_title: Is There a Gendered Parenthood
            Penalty in Indonesian Labor Markets?
listing_relative_url: /research/2024/11/34421034/gendered-parenthood-penalty-indonesian-labor-markets
topicv3: Gender and Employment m1326451 618,Gender and Labor Market m1326905 923,Gender and Economic Empowerment m1327622 911,General Labor Market Issues m1583939 4427
publishtoextweb_dt: 2024-11-12T00:00:00Z
dois: 10.1596/1813-9450-10973
origu: Off of Sr VP Dev Econ/Chief Econ (DECVP)
no_of_pages: 33
author_keys: 0: author_key: 1365130
1: author_key: 1512561
2: author_key: 1974997
model_extractions: Policy Research Working Paper 10973 Is There a Gendered Parenthood Penalty in Indonesian Labor Markets?

_Johanna Fajardo-Gonzalez Ardina Hasanbasri Fernando Rios-Avila_ Poverty and Equity Global Practice November 2024
Policy Research Working Paper 10973

# **Abstract**

This paper investigates the parenthood penalty in Indonesian labor markets, with a focus on gender disparities. It uses longitudinal data from the Indonesia Family Life Survey from 1993 to 2014 and employs a difference-in-differences approach with staggered adoption to estimate the impact of parenthood on labor market participation for both men and women. The results reveal that the birth of a child has a significant and persistent negative effect on women’s employment, with the penalty extending up to six years after childbirth. In contrast, men experience only short-lived and insignificant changes in employment after fatherhood. The analysis further identifies substantial heterogeneity across different subgroups. Women in urban areas and those with higher levels of education experience larger and more prolonged penalties, while rural women, those with lower levels of education, and those with extended family support recover more quickly. The findings highlight the role of socioeconomic factors in moderating the parenthood penalty and offer critical insights for policies aimed at promoting gender equality in the labor market.

This paper is a product of the Poverty and Equity Global Practice. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The authors may be contacted at jfajardog@worldbank.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
# Is there a Gendered Parenthood Penalty in Indonesian Labor Markets?

Johanna Fajardo-Gonzalez<sup>*</sup> Ardina Hasanbasri<sup>†</sup> Fernando Rios-Avila<sup>‡</sup>

**Keywords:** Labor supply, Childbirth Penalty, Fertility, Childcare, Gender, Indonesia. **_JEL_ Classification:** J13, J21

> *The World Bank, East Asia and Pacific Region. E-mail: jfajardog@worldbank.org

> †Yale University, Jackson School of Global Affairs. E-mail: ardina.hasanbasri@yale.edu

> ‡Levy Economics Institute. E-mail: friosavi@levy.org

The authors thank Daniel Halim, Emcet Tas, and participants at the Society of the Economics of the Household 2024 Conference for providing helpful feedback. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the World Bank Group and its affiliated organizations or those of the Executive Directors of the World Bank or the governments they represent. The authors have no conflicting interests to declare.
# **1 Introduction**

The impact of parenthood on women’s labor market outcomes has become an increasingly critical topic in development economics, particularly due to its long-term implications for gender equality and economic growth. Parenthood often leads to persistent penalties in terms of labor market participation, wages, and hours worked, with these effects disproportionately affecting women. This phenomenon, commonly referred to as the “parenthood penalty,” has been extensively documented in high-income countries, including Denmark (Kleven et al., 2019), as well as in emerging economies such as Chile (Berniell et al., 2021) and Mexico (Berniell et al., 2023). These studies have shown that the child penalty can last for years, with some suggesting that gendered norms around caregiving play a central role in limiting women’s labor market engagement post-childbirth.

In Indonesia, a middle-income country with a growing economy and complex social norms, the labor market presents a unique setting for investigating the parenthood penalty. Despite efforts by policymakers to boost women’s participation in the labor force, the female labor force participation rate has remained stagnant at around 50% for the past two decades (Cameron et al., 2020). This contrasts sharply with male participation rates, which hover around 80%. The persistent gender gap in labor market outcomes has been attributed to various factors, including traditional gender roles that assign women primary responsibility for childcare and household tasks (Heath, 2017), as well as structural barriers such as the limited availability of affordable childcare services and the rigidities of formal employment arrangements (Goldin, 2014, and Francavilla and Giannelli, 2011).

The limited flexibility of formal labor markets in Indonesia exacerbates the challenges faced by working mothers. Women are often compelled to choose between career advancement and family responsibilities, leading to interruptions in their career trajectories that negatively affect their long-term earnings potential. This issue is particularly pronounced in urban areas, where formal employment opportunities are more prevalent, but childcare services are scarce and expensive (O’Donnell, 2022). In contrast, rural areas, with their greater reliance on informal agricultural work, may offer more flexibility, though at the cost of lower earnings and job security. Given 2
these dynamics, understanding the extent and drivers of the parenthood penalty in Indonesia is essential for informing policy interventions aimed at promoting gender equality in the labor market.

While much of the existing literature on the parenthood penalty focuses on high-income countries with extensive social safety nets and generous parental leave policies, research on this topic in Southeast Asia remains limited. Studies in this region have typically focused on fertility trends or general labor market dynamics, with little attention given to the specific impact of parenthood on employment outcomes (Halim, 2022). Moreover, the few existing studies on Indonesia have largely overlooked the role of extended family support, education level, and urban versus rural differences in moderating the parenthood penalty. This paper aims to fill this gap by providing a detailed analysis of the parenthood penalty in Indonesia, with a focus on the heterogeneity of its effects across different population subgroups.

Our study makes several contributions to the literature. First, we provide estimates of the persistence of the parenthood penalty in Indonesia using data from the Indonesia Family Life Survey (IFLS), a longitudinal dataset that spans over two decades (1993–2014) and covers both urban and rural areas. This rich dataset allows us to track the labor market trajectories of individuals before and after the birth of their first child, providing a comprehensive picture of the long-term effects of parenthood on employment outcomes. Second, we employ a Difference-in-Differences (DID) methodology with staggered adoption, as proposed by Callaway and Sant’Anna (2021), to account for the timing of parenthood and to estimate the causal impact of becoming a parent on labor market participation. This approach allows us to control for potential biases arising from differences in pre-parenthood labor market trajectories between treated (parents) and control (non-parents) groups.

Our methodological contribution lies in the application of a staggered Difference-in-Differences (DID) framework, particularly suited for the context of a developing country with limited administrative data. This approach allows us to disentangle the dynamic effects of parenthood on employment outcomes over time, while accounting for cohort-specific heterogeneity. By leveraging this methodological innovation, we provide more nuanced estimates of the parenthood penalty in Indonesia, improving upon previous analyses in this area. However, an important 3
limitation of our methodology is the exclusion of sample weights, which may affect the representativeness of our findings. As a result, while our study offers valuable insights into the impact of parenthood on labor market participation, these results should be interpreted with caution when generalizing to the broader Indonesian population.

Our empirical analysis focuses on three key questions: (1) What is the overall magnitude of the parenthood penalty in Indonesia, and how does it differ between men and women?; (2) How does the timing of parenthood affect the persistence of the penalty, and are there differences in recovery rates between mothers and fathers?; and (3) What role do individual characteristics, such as education level, urban versus rural residence, and the presence of extended family members, play in moderating the impact of parenthood on labor market outcomes? By answering these questions, we aim to provide policymakers with evidence-based insights into the specific barriers faced by working parents in Indonesia and to suggest potential policy solutions for mitigating the parenthood penalty.

Our results can be categorized into two main areas: methodological insights and contextual findings specific to Indonesia.

From a methodological perspective, we find that household characteristics play a crucial role in estimating the parenthood penalty in Indonesia. Our preferred specification, which controls for various household characteristics, reveals important nuances. Without these controls, our initial analysis suggests that fathers experienced negative labor market effects, but these effects disappeared once the household characteristics were included in the model. This is consistent with findings from other studies, where fatherhood typically shows little or no effect on labor market outcomes. For women, the inclusion of controls also significantly altered the results. While the birth penalty for mothers initially appeared to persist for an extended period, our analysis with controls showed that the penalty diminished by the year seven after the first birth. This contrasts with findings from other labor market contexts, where the penalty can persist for up to ten years. This highlights the importance of conducting heterogeneity analyses to better understand how different groups of mothers are affected by parenthood and how factors such as household composition influence these dynamics.

4
The second set of findings focuses on the magnitude and persistence of the parenthood penalty across various subgroups in Indonesia. These results offer important insights for policymakers seeking to target interventions effectively. First, we found that households with an extended family member living in the household experienced the fastest recovery from the birth penalty. For these households, the penalty became insignificant by the second year after childbirth. In contrast, for households without extended family members, the penalty persisted until year seven. Second, we observe significant differences in the magnitude and persistence of the birth penalty based on education level. Highly educated individuals faced larger penalties (approximately 30% in the first year) and for a longer period compared to their less educated counterparts (around 20% in the first year). Furthermore, we find that rural women experienced the highest birth penalty in year three, after which the trend began to reverse. In contrast, urban women saw this reversal begin in year four. These results suggest that expanding access to childcare could significantly reduce the persistence of the birth penalty, particularly for highly educated urban women, who experienced the largest and most persistent penalties. This subgroup represents an important target for policy interventions, where childcare provision could have the greatest impact.

The rest of the paper is structured as follows. Section 2 provides an overview of the Indonesia Family Life Survey (IFLS) data and the institutional context of the Indonesian labor market. Section 3 outlines our empirical strategy, including the DID methodology and the identification assumptions. Section 4 presents our main findings, including a detailed heterogeneity analysis and robustness checks. Finally, Section 5 discusses the policy implications of our findings and concludes with suggestions for future research.

# **2 Institutional Context, Data, and Descriptive Statistics**

## **2.1 The Indonesia Family Life Survey**

The Indonesian Family Life Survey (IFLS) is a longitudinal multitopic household survey that is representative of 83% of the population and covers 13 of the 27 provinces in Indonesia. Individuals were tracked through five survey waves spanning 21 years: 1993, 1997, 2000, 2007, and 5
2014. The household survey covers a range of topics related to household well-being and socioeconomic status, including individuals’ work history and their fertility decisions. Information on household and individual-level characteristics were also available. Given that the original household members in 1993 were tracked when they moved or later got married and started a new household, the number of individuals grow as we move across surveys due to these new households. For our analysis, we kept households who are observed and tracked in all four waves so that we have a good amount of information on their work history.

Individuals who were at least 15 years old at the time of the survey were asked about their current and previous work status. A person is considered to be currently working if they responded yes to one of the following prompts: (1) identified working as the primary activity, (2) had work for pay for at least one hour in the past week, (3) having a job/business but currently is off work, (4) or working for a family-owned farm/business (unpaid family workers). We use this definition of working as our main outcome of analysis. For the years between the surveys, individuals also reported whether they worked that particular year. For each year including the current one, those who worked also answered additional questions about their job, such as the sector of occupation (10 categories of sectors which we simplified into three - agriculture, industry, and service) and the type of occupation (self-employed workers, government or private employee, unpaid family worker, and agricultural/non-agricultural casual workers).

We restricted our sample of analysis to individuals who exclude individuals based on the timing of first childbirth. We first identify the year when the first child was born. Then, individuals with children born outside the 1993-2014 survey period were excluded.<sup>1</sup> We further restricted our sample to parents who had their first child between ages 20 and 40. The prevalence of individuals who had their first birth before 20 and after 40 is quite low. Individuals with incomplete work histories were excluded and the sample only includes respondents with at least 5 years of work history. Our final sample comprises 2,118 mothers and 2,800 fathers.

A critical caveat in our study concerns the non-randomness of never-parents. The sample of never parents consists of 3,085 men and 2,110 women. Because we restrict our sample based on age at first birth, we are not able to apply similar restrictions on the never parents, as the age at

> 1Inconsistencies in age and birth year data required additional data cleaning.

6
<!-- Start of picture text --> 15<br>A<br>ry2<br>a5<br>05<br>0<br>15 20 25 30 35<br>age at first birth<br><!-- End of picture text --> <!-- Start of picture text --> 15<br>A<br>2ry<br>a5<br>05<br>0<br>10 20 30 40 50<br>age at first birth<br><!-- End of picture text -->
der and whether individuals live in rural or urban areas, we have prepared detailed descriptive statistics to illustrate these differences. These statistics are presented in a nuanced manner, taking into account both gender and geographical location (rural vs. urban). The corresponding data and analysis are provided in Table 1, which offers a clearer understanding of how employment trends among parents are influenced by these key factors.

Regarding employment before the first birth, there is a noticeable difference between mothers and fathers. About 44% of the mothers in rural areas and 49% in urban areas were employed prior to their first childbirth. This contrasts with that of fathers, where approximately 88% in rural and 90% in urban worked before becoming parents. An interesting observation is that the average age at which both mothers and fathers first start working is quite similar, around 20 to 21 years old. This similarity suggests that initial entry into the workforce occurs at a comparable stage in life for both genders, although the subsequent employment trajectories, especially surrounding the period of first childbirth, diverge notably.

In our study sample, the predominant religion among households is Islam. On average, households consist of approximately 5 to 6 members, including children. Around 24-34% of these households (depending on the group) include extended family members who live together with the parents.

8
Table 1 Descriptive Statistics of Final Sample of Parents and Never Parents

||M|**Ru**<br>en|**ral**<br>Wo|men|M|**Urb**<br>en|**an**<br>Wo|men|
|---|---|---|---|---|---|---|---|---|
||parents|never<br>parents|parents|never<br>parents|parents|never<br>parents|parents|never<br>parents|
|Number of person in household|5.57|5.58|5.64|5.06|5.51|5.36|5.71|5.07|
|Share with living with extended family|0.24|0.30|0.27|0.30|0.28|0.29|0.28|0.34|
|Years completed education|9.27|10.35|9.34|8.60|11.13|11.98|10.99|11.75|
|Share of years working|0.81|0.66|0.49|0.56|0.77|0.58|0.45|0.52|
|Proportion worked the year before frst birth|0.88|.|0.44|.|0.90|.|0.49|.|
|Religion: Islam|0.89|0.86|0.91|0.84|0.91|0.90|0.92|0.88|
|Age frst working|19.97|21.21|20.46|28.08|21.10|21.09|21.50|23.64|
|Share of Age at First Birth|||||||||
|Age 20 - 24|38.92|.|72.38|.|29.43|.|59.28|.|
|Age 25 - 29|49.35|.|24.19|.|54.00|.|34.49|.|
|<br>Age 30 - 34|11.55|.|3.25|.|16.14|.|6.12|.|
|<br>Age 35 - 41|0.19|.|0.18|.|0.43|.|0.11|.|
|Number of Observations|573|326|748|231|742|696|1,071|415|

9
In Table 2, we present detailed statistics on the employment sectors and job types of both parents and individuals who have never been parents. The data is organized on an individual-year basis. From these data, we observe notable differences in sector engagement based on urban/rural settings and gender. Urban women who are parents predominantly work in the service sector, with about 70% employed in this area, compared to 57% for their male counterparts. In rural areas, the distribution is different for parents; about 50.1% of men work in agriculture, which is the most common sector, followed by services at approximately 30.9%, and industry at around 18.9%. Rural women are more frequently employed in either services or agriculture, with approximately 41%-43% working in the former and 41% working in the latter. Just under 18% of rural women are working in industry). When it comes to the types of jobs held, there is a distinction between parents and non-parents. Never parents are more likely to be in employed work. For rural women, the most common form of employment is as paid employees. This contrasts sharply with rural fathers, who are predominantly self-employed. Furthermore, the proportion of women working as unpaid family workers is markedly higher in rural areas compared to men.

10
Table 2 Descriptive Statistics of Work Sector and Job Type

||M|**Ru**<br>en|**ral**<br>Wo|men|M|**Ur**<br>en|**ban**<br>Wo|men|
|---|---|---|---|---|---|---|---|---|
||parents|never<br>parents|parents|never<br>parents|parents|never<br>parents|parents|never<br>parents|
|Share of Work Sector|||||||||
|Agriculture|50.16|45.61|42.99|41.34|11.53|9.68|5.77|4.19|
|Industry|18.91|23.70|15.76|17.46|31.43|29.49|25.15|21.84|
|Services|30.93|30.69|41.24|41.20|57.04|60.83|69.07|73.96|
|Share of Job Type|||||||||
|Self-employed|42.18|25.87|25.01|26.67|27.52|17.43|23.44|20.17|
|Employee|39.07|42.48|37.39|44.21|61.30|65.76|59.88|63.42|
|Unpaid Family Worker|8.61|16.72|30.42|23.42|3.07|5.25|12.53|12.41|
|Casual worker|10.14|14.93|7.18|5.70|8.10|11.56|4.16|4.00|
|Number of Observations|11,703|3,997|14,821|2,874|12,348|7,692|17,690|4,544|

11
# **3 Empirical Approach**

## **3.1 Treatment Identification**

In our study, we define the treatment status based on the first identifiable instance of individuals becoming parents, determined by the age of their oldest child. Therefore, the timing of treatment - becoming a parent – is initially established based on the birth year of the oldest child. We excluded from our sample those individuals who became parents prior to their initial interview in the IFLS. This exclusion extends to any retrospective data that might indicate parental status prior to the initial survey interview. This approach ensures a more focused analysis of the impact of transitioning into parenthood during the survey period, providing clearer insights into the effects of this significant life event on various outcomes.

A distinctive feature of our approach, as compared to other studies employing a staggered design, is the use of an individual’s age, rather than the calendar year, to pinpoint the timing of the treatment. This age-based identification not only determines when individuals become parents, but also helps categorize cohorts according to the age at which they assume parenthood.

Employing age as a key variable offers a significant advantage for our Difference in Differences (DID) analysis: it allows for the comparison of individuals who are the same age. Within this framework, the year just before the treatment, denoted as _G −_ 1, corresponds to the year immediately preceding the birth of the first child. This methodological choice enhances our analysis by aligning individuals based on their life stage rather than just chronological year.

## **3.2 Staggered Identification**

We apply a Difference in Differences (DID) strategy to assess the impact of parenthood on labor market outcomes in Indonesia. Here, becoming a parent is treated as the ’treatment’ variable. Our approach involves identifying cohorts based on when their first child was born, allowing us to examine both the immediate and long-term effects of this major life event on their working status.

Given the variability in the timing of parenthood between individuals, our DID analysis incorporates a staggered adoption design. This approach differs from typical staggered adoption 12
models, as described in the general setup by Roth and Poe (2023) and de Chaisemartin and D’Haultfœuille (2022). Instead of using the calendar year as the time variable, our study focuses on the individuals’ age. Specifically, we use the age at which individuals first became parents as the treatment variable. The key advantage of this method is that it allows us to compare individuals of the same age, which is crucial since both the decision to work and to become a parent are closely tied to an individual’s age.

One limitation of this approach is the assumption that unobserved effects related to the year do not significantly influence our analysis. To mitigate this concern, we estimate models with comparable specifications across different subsamples. These subsamples are differentiated based on factors such as the presence of extended family, education level, and urban or rural residence.

Employing a DID approach with staggered adoption enables us to accomplish several objectives: (i) quantify the impact of first-time parenthood on labor market outcomes for both men and women; (ii) track the evolution of these effects over the course of individuals’ lives; and (iii) explore the presence and extent of a parenthood penalty within the Indonesian labor market. This methodology provides a nuanced understanding of how parenthood intersects with employment dynamics in Indonesia.

Borrowing from the event-studies literature, and following Sun and Abraham (2021) we consider the following specification: The dependent variable _Yia_ denotes the labor outcome of interest, whether the person is working according to the definition of work in Section 2.1, for individual _i_ when the person was _a_ years old. For each individual in the data, we observe the age _Ai_ when they became parents for the first time and the number of years _eia_ = _a − Ai_ before and after the birth of the first child. Let _τ_ be the relative period or event time index such that _τ_ = 0 denotes the year individuals have their first child. And let _A_ be the cohort to which they belong, depending on the year of the firstborn child. The relative event index allows us to compare individuals with the same exposure to parenthood even if they became parents at different points in their life.

13
The first term on the right-hand side of Equation 1 denotes a complete set of event dummies that indicate the time relative to becoming a parent for the first time. This effect is allowed to vary by cohort _A_ . The event time dummy at _τ_ = _−_ 1 is omitted in order to measure the impact of children relative to the year just before the first childbirth. However, we exclude from the sample observations that are not observed at _τ_ = _−_ 1. Thus, the event time coefficients _βτ_ , _E_ for _τ <_ 0 capture pre-treatment trends, whereas _τ >_ 0 capture the post-first-child dynamic effects. Summary treatment effects can be estimated by averaging the relative treatment effects _βτ_ , _A_ across all cohorts. In this framework, individuals who never become parents have a _τ_ = _−_ 1, and are generally used as a comparison group.

Allowing the effect _βτ_ , _A_ to vary by cohort allows us to identify the heterogeneous impact of parenthood while avoiding the negative weights, incorrect controls, or contamination raised by Callaway and Sant’Anna (2021), Sun and Abraham (2021) and Goodman-Bacon (2021), among others, regarding the estimation of DID models. Our model specification also includes individual and age-fixed effects ( _αi_ and _αa_ ), and we assume that an idiosyncratic error _εit_ is exogenous.

While the model specification described in 1 accounts for some of the biases and contamination issues described in the DID literature, it does not easily allow for the introduction of control variables in the model specification. As described in Sant’Anna and Zhao (2020), adding controls directly to the model imposes important restrictions on the relationships between controls and outcomes across time. Furthermore, adding time-varying coefficients may further bias the results, because we might be including controls that could be directly affected by the treatment, creating a collider bias. As a general recommendation, Sant’Anna and Zhao (2020), Callaway and Sant’Anna (2021), and Wooldridge (2021) recommend using only time-invariant characteristics, pre-treatment characteristics, or those where the changes across time are exogenous. Although Wooldridge (2021) proposes a method to control for time-invariant characteristics using a regression-type analysis similar to Sun and Abraham (2021), we use the method proposed by Callaway and Sant’Anna (2021) to control for pre-treatment characteristics, as well as allowing for the doubly-robust properties developed in Sant’Anna and Zhao (2020).<sup>2</sup>

> 2It should be emphasized the methods proposed by Callaway and Sant’Anna (2021), Sun and Abraham (2021), and Wooldridge (2021) identify the same point estimates for treatment effects if there are no covariates, and the never treated are used as controls.

14
The main difference between Callaway and Sant’Anna (2021) and other methodologies is that instead of analyzing the DID setup from a regression perspective, the authors propose to deconstruct the analysis by focusing on carefully selected 2x2 DID designs. By doing this, we can use appropriate variation for the identification of treatment effects and exploit strategies that better identify treatment effects if either the outcome model or the treatment model is correctly identified. Afterward, appropriate aggregate measures can be obtained by estimating weighted average effects as needed.

Adapting from their original paper, average treatment effects for all cohorts and ages are defined as: where _g_ indicates the year a person becomes a parent, _a_ any particular point in a person’s lifetime. _Ci_ , _g_ indicates if a particular observation can be used as a control when analyzing the treatment effect of cohort _g_ . The comparison group can be composed of those who never became parents within the time window they participated in the survey and those who were not parents yet at some point of analysis.

# **3.3 Identifying Assumptions**

The main assumptions required for the identification of treatment effects in a DID design are the Stable Unit Treatment Values Assumption (SUTVA), limited treatment anticipation, and [conditional] parallel trends assumption.

While the birth of a child could have large effects on other members’ labor market outcomes within a family, it is doubtful it will affect individuals outside of the family unit. As such, we make the assumption that individuals are only affected by the birth of their own children, which supports the validity of SUTVA.

With regard to treatment anticipation, the standard assumption of no treatment anticipation may be too strong to analyze the impact of the first childbirth. As we show in the empirical section, there is suggestive evidence of some anticipation effects of at least one year. It might be that, 15
because of the length of pregnancy and timing of the survey, parents adjust their labor market decisions at least a year before the birth of their first child. This could also be related to the impact of pregnancy itself. Because of this, the core of our results use estimates in which the comparison year is set at _g −_ 2 (two years before the birth of a child, or a year before pregnancy), rather than _g −_ 1 as is usually the case.

With regard to the comparison group, further discussion is needed to evaluate the validity of the parallel trends assumption. According to Callaway and Sant’Anna (2021), we can consider two types of parallel trend assumptions. One type assumes that the potential outcomes of the treated and never-treated units follow the same trends, while the other type assumes that the potential outcomes of the treated units follow the same path as units not yet treated, which may or may not include the never-treated units.

Although the use of never-treated units is generally a good option to address the potential bias due to anticipation effects, it may not be appropriate if the never-treated group has substantially different trends compared to the eventually treated units. In this paper, we provide suggestive evidence that never parents are substantially different from individuals who would eventually become parents. This fact may lead to strong violations of the parallel-trends assumption. To circumvent this issue, we use not-yet-treated units as our comparison group, excluding those who did not become parents during the study period. When doing so, both the conditional and unconditional parallel trends assumptions appear to hold, as we show in the Results section.

# **4 Results**

## **4.1 Main Estimation Results**

We start our analysis by focusing on the impact of first parenthood on working status under the assumption of unconditional parallel trends, using never-treated individuals as the comparison group. Figure 2 provides the event study estimates for both prospective fathers and mothers. This figure also reports the 95% uniform wild-bootstrap confidence intervals.

In this preliminary specification, we observe a decline in employment status for both mothers and fathers. However, the negative impact is more pronounced among mothers, with only a 16
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<!-- Start of picture text --> 0.2<br>o4<br>O41“ptipnteternnty tt<br>-0.2<br>04<br>-0.5<br>-10 5 0 5 10<br>Periods to Treatment<br><!-- End of picture text --> <!-- Start of picture text --> 02<br>ot<br>-0.1~ fayI<br>-0.2 :<br>04<br>-0.5<br>-10 5 0 5 10<br>Periods to Treatment<br><!-- End of picture text -->
# **4.4 Heterogeneity Analysis**

Although the methodology proposed by Callaway and Sant’Anna (2021) allows us to avoid the pitfalls of using the standard two-way fixed effect approach, by allowing for full heterogeneity in treatment effects across time and cohorts, it does not allow us to analyze heterogeneous effects based on individual characteristics directly.

In this section, we use an alternative approach that will allow us to explore heterogeneity based on individual characteristics by estimating and analyzing treatment effects across selected groups. In each case, the rest of the covariates are kept as controls.

## **Rural and Urban Areas**

The first heterogeneity of interest is the impact of parenthood across urban and rural regions. Labor markets in urban and rural areas are quite different. More agriculture and informal work are concentrated in rural areas and these occupations are typically more flexible in terms of work hours. Figure 11 provides the estimated dynamic effect for men and women in rural areas, while Figure 12 shows the estimates for urban.

We observe some diverging trends for urban versus rural men. Although the average posttreatment effect is still insignificant for men, there is a small positive effect in the initial years for rural men, while a small negative effect is observed for urban men. For rural men, some positive effects are also observed in years 7 and 8.

Urban and rural women experienced an initial drop in the probability of working that is similar in magnitude, 26% for rural and 29% for urban in the first year after birth. However, the recovery trends between the two groups differ. Urban women’s negative effect starts to reverse slowly in year 4, moving to -23% from -32% in the previous year. The effect becomes -16.5% in year 7. In rural areas, women’s negative trend reverses a year earlier, becoming -15% in year 3 after birth.

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# **5 Concluding Remarks**

The nuanced heterogeneity analysis of this paper has identified groups for which the birth penalty is the highest in magnitude in the Indonesian context. Women in rural areas, women with extended family support, and low-educated individuals experience comparatively lower penalties, indicating that family structure, availability of child support, job characteristics (such as job flexibility, and maternity and paternity leave), and geographical context play critical roles in moderating the effects of motherhood on labor market outcomes. These findings suggest that the availability of familial childcare support and the relative flexibility of labor markets in rural areas may alleviate some of the barriers mothers face when reentering the workforce. In contrast, urban women and highly educated women face steeper penalties, likely due to the rigidity of formal employment arrangements and the high opportunity costs associated with childcare in urban settings.

From a methodological perspective, this paper leverages advanced econometric techniques, particularly the use of a staggered adoption difference-in-differences framework, to carefully disentangle the dynamic effects of parenthood over time. The application of Callaway and Sant’Anna’s approach to control for heterogeneous treatment effects across cohorts and time ensures robustness in identifying the causal impact of parenthood, while accounting for potential biases inherent in traditional two-way fixed effects models. Furthermore, the inclusion of pre-treatment controls and adjustments for anticipation effects provides a clearer picture of the labor market transitions surrounding pregnancy and childbirth.

While this analysis offers valuable insights, the findings should be interpreted with caution due to certain limitations. The exclusion of sample weights and the use of a restricted sample, excluding individuals who never became parents, may limit the generalizability of the results to the broader Indonesian population. Future research could benefit from a more representative sample, as well as exploring additional dimensions such as the role of formal childcare services and labor market policies that could mitigate the parenthood penalty.

The findings of this study have important policy implications. Addressing the parenthood penalty necessitates a multi-pronged approach that tackles both supply-side and demand-side 28
constraints. Expanding access to affordable and quality childcare, promoting flexible work arrangements, and combating discriminatory norms and practices are essential steps toward creating a more equitable and inclusive labor market. Furthermore, targeted interventions that consider the specific needs of women in different age groups and socioeconomic contexts are crucial for maximizing the effectiveness of policy efforts.

Future research could explore the long-term consequences of the parenthood penalty on women’s economic well-being, including its impact on lifetime earnings, career progression, and retirement security. Furthermore, investigating the role of fathers in childcare and household responsibilities could shed light on potential avenues for promoting a more equitable division of labor within families. By deepening our understanding of the complex dynamics surrounding parenthood and participation in the labor market, we can pave the way for policies that empower women, support families, and foster sustainable economic development in Indonesia.

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