This paper studies the interplay between paid parental leave policies (PPL), fertility, and child human capital, highlighting heterogeneous effects across the income and education distribution. Using micro-level data, I show that the introduction of PPL in the U.S. is associated with an increase in fertility but a decline children’s long-term outcomes. To rationalize these findings, I develop a heterogeneous-agents model that combines fertility and parental investment decisions feeding into a function of human capital that accumulates across multiple stages of childhood. Calibrated to U.S. data, the model replicates between 40 and 80\% of the fertility response estimated in my empirical analysis. I then use it as a policy laboratory to study a more generous paid leave scheme and show that fertility responses vary across the income and education distribution, generating a quantity–quality trade-off among families facing binding budget constraints. Finally, I show that in the absence of fertility responses, PPL would raise child human capital, underscoring the central role of fertility in shaping policy effects.

This paper examines how non-monetary costs of maternal care influence women’s fertility decisions. We leverage a Danish reform that exogenously extended parental leave entitlements—raising average leave uptake by 5.3 weeks—to investigate heterogeneous effects on subsequent births based on the presence and employment status of women’s own mothers and mothers-in-law. Using a instrumental variable (IV) startegy, we find that among women whose mothers were non-working and able to provide childcare support during leave, the extended benefit increases the probability of a second birth within three years by 11 percentage points (rising to 23 points for first-time mothers). In contrast, women lacking family support—those whose mothers and mothers-in-law remained employed, were deceased or living abroad—experience an 11 percentage point decline in the likelihood of another child. We interpret these results as evidence that family support, particularly from the maternal grandmother, mediates the impact of longer leave on fertility by altering the non-monetary (emotional) costs of childcare. Extended leave can exacerbate emotional burdens if it prolongs periods of isolation for women recovering from childbirth as sole caregivers, whereas if complemented with family support, extended leave mitigate these costs and encourages higher fertility. Our findings highlight the interplay between formal leave policies and informal care networks, with important implications for the design of family-friendly policies.