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Childbirth causes persistent gender differences in labor force participation and the diffe-
rence in employment rates of married women with and without pre-school children varies
substantially across countries. To what extent can child-related transfers account for this
differential? To answer this question, I develop a life-cycle model of joint labor supply,
in which female human capital evolves endogenously and a fraction of households has
access to informal childcare. I calibrate the model to the US and Denmark, two countries
in which the gap in employment rates of women with and without pre-school children
differs in sign and magnitude: the gap is 13.2% in the US and -3.7% in Denmark. After
taking the labor income tax treatment of married couples and variation in childcare fees
into account, I find that child-related transfers are key to explaining the positive gap in
the US and the negative gap in Denmark. I show that this mechanism is quantitatively
important to account for variation in the maternal participation gap across other European
countries as well.
