A growing body of research has investigated the individual costs and benefits of generous parental leave policies for women, but the firm-side effects have been underexplored. In this study, we investigate firms' responses to the introduction of parental leave policies with respect to different margins of the labor input. We focus on whether and how firms adjust the gender composition of their workforce when the opportunity costs of certain types of worker groups rise. We exploit two parental leave reforms in Norway in 1993 and 2005, and rich employer-employee matched administrative data on the population of workers and firms.
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