Maternity Leave and Labour Market Outcomes

Abstract

This paper examines gendered labour market consequences of maternity leave and related legislation, across age profiles. Using a difference-in-differences strategy, on individual level panel data, we estimate the effect of an amendment in India’s maternity leave legislation on employment and wages of women in the high-fertility age group. Against this background, we then construct a stylized micro-founded model of the labour market in a life-cycle search and matching framework. This model explores the effects of a ‘maternity shock’ on differential outcomes for men and women of different age, with and without policy intervention. Our empirical and theoretical analysis provides robust evidence that women in the high fertility age group experience adverse effects in the labour market, that are exacerbated in the presence of mandated maternity leave policies. Our findings underscore the fact that policy design must be cognizant of underlying labour market dynamics if they are to prevent further widening of existing gender gaps in labour market outcomes.

Keywords: Maternity leave regulations, Life-cycle search and matching, Gender differences