Abstract
It is argued in this chapter that income contingent loans (ICL) may provide an efficient and equitable option for extending taxpayer funded paid parental leave (PPL) schemes, which may be otherwise limited in duration and payment amounts due to fiscal pressures. As is the case for higher education, a lack of liquidity and market failure can prevent families from financing an extension of leave beyond that typically offered in most OECD countries through taxpayer funded PPL. It is argued that an ICL could provide consumption smoothing and encourage participation, yet taxpayer costs could be kept low (if not zero) provided scheme design mitigates against adverse selection and moral hazard. It is further argued that an appropriately designed scheme could be welfare enhancing to parents even in the absence of taxpayer subsidies.
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References
Chapman, B. and T. Higgins (2009) ‘An Income Contingent Loan for Extending Paid Parental Leave’, Australian Journal of Labour Economics, Vol. 12, No. 2, pp. 197–216.
Gans, J. (2008) ‘Return to Work Credits’, Submission to the Productivity Commission Inquiry into Paid Maternity, Paternity and Parental Leave, Canberra. Online at: http://works.bepress.com/joshuagans/18/
Higgins, T. (2010) ‘Essays in the Development and Costing of Income Contingent Loans’, PhD Thesis, College of Business and Economics, The Australian National University.
Human Rights and Equal Opportunity Commission (2002) A Time to Value. Proposal for a National Paid Maternity Leave Scheme, Sex Discrimination Unit, Sydney.
O’Neill, S. (2004) Paid Maternity Leave, Parliament of Australia, Parliamentary Library (Canberra: AGPS).
Productivity Commission (2009) Paid Parental Leave: Support for Parents with Newborn Children. Final Report (Canberra: AGPS).
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© 2014 International Economics Association
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Higgins, T. (2014). Improving Paid Parental Leave through Income Contingent Loans. In: Chapman, B., Higgins, T., Stiglitz, J.E. (eds) Income Contingent Loans. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1057/9781137413208_11
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DOI: https://doi.org/10.1057/9781137413208_11
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-137-41319-2
Online ISBN: 978-1-137-41320-8
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