An Internatioal Comparison and Assessment of Maternity Leave Regulation

Provisions for maternity leave are common among industrialized countries, but their institutional design varies distinctly from country to country. Developing our theory on the impact on maternity leave regulations on women's labor market situation, we argue that a woman on leave creates a re-organization problem for her employer. The costs of re-organization will not simply increase with the duration of maternity leave, but display a hump-shaped curvature which peeks at medium-leave duration. More than its expected duration, however, the predictability of leave duration influences the process of re-organization. Employer co-financed maternity pay further adds to the costs of re-organization. We then use this theory to analyze and compare the costs of maternity leave stipulations in the United States, the UK, Netherlands, Japan, Germany, and Denmark by assessing in detail the legal provisions on leave durations, leave predictability and employer-co-financed maternity pay. We rank the countries under consideration according to the re-organizations costs their maternity leave regulations impose on employers and derive hypotheses about the effect on women's labor market situation. Following our theoretical analysis, we review the existing empirical literature on maternity leave: While existing surveys among employers and working mothers are in line with our theoretical considerations, the mixed evidence presented in the existing econometric studies concerning the effect of leave duration on female wages and labor force participation may result from having excluded the issue of predictability of leave duration as well as the question of co-financed maternity pay. We close with (tentative) conclusions for the design of maternity leave provisions, which are currently being discussed and revised in many countries around the world.