Establishment-level wage effects of entering motherhood

We analyse the wage effects following employment breaks of women who enter motherhood using a novel matching approach where mothers wages upon return to work are compared to those of their female colleagues within the same establishment. Using an administrative German data set, we apply a fixed-effects propensity score matching based on information two years before birth of the first child. Our results yield new insights into the nature of the wage penalty associated with motherhood: when matching with establishment-specific effects we find that first births reduce womens wages by 19, whereas ignoring the identifier and matching across all establishments would yield a wage cut of 26. We therefore conclude that selection into establishments is an important explanatory factor for the family pay gap.