Labor market frictions for female workers and corporate innovation

Abstract

I investigate the impact of labor market frictions for female workers on corporate innovation. Following the adoption of state-level paid family leave acts, which exogenously facilitate labor market participation of female employees, firms headquartered in affected states show significant increases in their innovation relative to unaffected firms. This effect is stronger for firms more reliant on a skilled workforce, in less tight local labor markets, with lower female employment, and that have higher female turnover. These findings support my hypothesis that the adoption of paid family leave acts fosters corporate innovation by improving talent allocation through an expanded labor supply of female workers. Overall, my results imply that labor market frictions for working mothers inhibit corporate innovation.