Abstract: I investigate how joint physical custody affects parents’ labour market outcomes after divorce. Exploiting a custody reform in the Netherlands that encouraged joint physical custody and increased its uptake by 7.6 percentage points among parents with young children, I find that mothers who divorce after the reform experience a 0.8% wage decline in an intention-to-treat framework relative to those divorcing before the reform (10% LATE for compliers). This is driven by slower wage growth for mothers in the treatment group, who are less likely to move further away to access better-paid employment. The findings are in line with co-parenting tying both parents to one location, thereby reducing geographical mobility. Mothers' hours decrease temporarily due to a reduction in overtime, while fathers' wages and hours are unaffected. The negative wage effect is concentrated among mothers who were second earners during their marriage and have high educational attainment. Due to gendered co-location decisions, joint physical custody results in a larger gender wage gap between mothers and fathers. My results indicate an efficiency cost of location constraints under joint physical custody, and that this constraint could be relaxed through remote working.

for information angela.baldassarre@unibocconi.it or giulia.zenoni@unibocconi.it