Increased Paid Maternity Leave and Children's Development Measured at Age Four to Five : An Empirical Analysis

Parental leave policies are often enacted based on the premise that children will benefit from an extended period of time spent with their parent. A number of research studies have looked at the effect of maternal time investments on the early development of skills, behavioral well-being and health, but the results thus far are mixed and mainly based on multivariate analysis. This approach can often not eliminate selection bias and can rarely predict the sign and magnitude of the bias. In this paper, I evaluate the effect of extended maternal care on children’s development at age 4 to 5 using observational data prior to and after the Canadian parental leave reform, which extended total paid leave from 25 to 50 weeks on December 31st, 2000. Previous research exploiting this labor supply shock found that mothers significantly increased their time at home in the first year, but generally found no significant effects on parent-reported measures of development between age 7 and 24 months. For the first time in this literature, children of mothers receiving maternity leave benefits are identified and compared with all other children. Using matching difference-in-differences, I find that the policy change had positive effects on cognitive development, measured using different standardized tests for children aged 4 and 5. Behavioral development effects are mixed and mainly not significant. Effects on the family environment and parent-reported health measures are positive and significant