Job Market Paper
Bucks for Bumps: How Paid Parental Leave Pays Off for Firms
Updated September 2026
Firms use benefits such as paid parental leave (PPL) to attract and retain employees. In the U.S., which lacks broad public PPL benefits, firms increasingly provide this benefit. Systematic evidence of its benefits remains limited, due in part to the absence of comprehensive data on firm policies. Using a novel, hand-collected database of firm policy changes, this paper estimates the causal effect of PPL expansion on employee retention using a differences-in-differences approach. PPL expansions reduce departure rates by 3.1%, an effect equivalent to a permanent wage increase of 1.8%. Retention gains for women are concentrated among the lowest paid and those in the most junior roles, while retention gains for men are broad-based. At the firm level, retention gains concentrate in the interior of the internal labor market flexibility distribution and among firms with moderate firm-specific human capital, and they are robust to concurrent benefit changes and to firm revenue trajectories. Public PPL programs, by contrast, show no comparable retention effect, consistent with the non-portability of firm-provided benefits. Combining fertility estimates from the American Community Survey (ACS) with worker and firm data, the paper calculates the expected costs of PPL provision and compares them to retention gains: at realistic utilization rates, PPL expansions generate positive net returns to firms.