This paper studies the implications of paid parental leave (PPL) policies on fertility and children’s human capital. Using micro-level data, I show that the introduction of PPL in New Jersey is associated with an increase in fertility. To investigate the implications of these policy-induced responses for children, I develop a heterogeneous agent model that combines endogenous fertility and multiperiod parental investments in children’s human capital. I structurally estimate the model parameters to match key moments characterizing the U.S. economy. I then use the model to conduct a counterfactual exercise by simulating the introduction of the New Jersey policy at the national level. The model predicts an increase in higher-order births in response to the policy implementation, with larger effects among middle-income families and among low-educated women. The increases in fertility lead parents to dilute per-child investment, negatively affecting children’s human capital through the mechanism of the quantity-quality trade-off. Finally, I show that in the absence of fertility responses, PPL would lead to higher investment in children, with positive implications for their 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.