The Impact of Paid Maternity Leave on Women's Employment : Evidence Using Firm-Level Survey Data from Developing Countries

The relationship between paid maternity leave and the share of female workers in registered private firms is analyzed using firm-level survey data for 111 developing and emerging countries. Theoretically, the relationship can be either positive or negative. Higher maternity leave raises the cost of female workers to the employer, discouraging female employment. However, higher maternity leave encourages more females to enter the labor market, implying greater female employment. The results show that the latter effect dominates. That is, a positive, large, and statistically significant relationship is found between maternity leave and female employment. A conservative baseline estimate is that the share of female workers in a firm increases by 2.08 percentage points for each log point increase in the number of days of paid maternity leave. Alternatively, an increase in the number of days of paid maternity leave from its smallest to highest value (0 to 410 days) increases the share of female workers by 12.5 percentage points. The positive relationship between female workers and maternity leave is much larger when maternity leave is fully funded by the government than when paid for by the employer, and in countries where there is a higher share of females in the childbearing age group of 20-29 years. These heterogeneities highlight channels that accentuate the relationship, thereby serving as checks against endogeneity concerns with the estimation. The distributional implications of paid maternity leave are also analyzed by estimating its impact on low-skilled versus high-skilled employment. Important policy implications of the findings are discussed