June 2013

IZA DP No. 7462: Maternity Leave and the Responsiveness of Female Labor Supply to a Household Shock

published as 'Female labour supply and household employment shocks: Maternity leave as an insurance mechanism' in: European Economic Review, 2016, 87, 256-271

Female labor supply can insure households against shocks to paternal employment. The paper estimates whether the female labor supply response to a paternal employment shock differs by eligibility to maternity employment protection. We exploit time-state variation in the implementation of unpaid maternity leave through the Family and Medical Leave Act (FMLA) in the US which increased employment protection from 0 to 12 weeks. We find that mothers eligible for FMLA speed up their return to work in response to a paternal shock, with a conditional probability of being in work 53% higher than in households with no paternal shock. In contrast, there was a negligible insurance response for mothers with no employment protection.