Identification of Child Penalties

Abstract

This paper formalizes the identification framework underlying common child penalty triple difference estimators that normalize by counterfactual earnings. I reverse-engineer the assumption underlying the validation test: parallel-trend violations, divided by counterfactual earnings, are equal between genders, a framework I term Normalized Triple Differences (NTD). Under NTD, however, I find that the conventional estimator does not identify its target causal estimand. I show that the effect of parenthood on the gender earnings ratio is point identified under NTD. Using the new estimator on Israeli administrative data, I find heterogeneous contributions of parenthood to gender earnings inequality across treatment groups.