Motherhood Penalty Revisited: Impacts of Maternity Leave Mandates on Nature of Employment Contracts

In this paper we study the extension of paid maternity leave from 12 weeks to 26 weeks in India to estimate its effect on the contractual arrangements of working women. To identify causal effects, we exploit the variation generated by the institutional features of the policy mandate in India, which applies only to establishments employing 10 workers or more. We find that women are 4.3 percentage points less likely to be employed as regular salaried workers in the establishments as a result of this policy. We also show that there is an increase in the employment of women as unpaid and wage labourers in establishments, but no change takes place in women entrepreneurship. The effects appear to be driven by married and younger women confirming that the extension of maternity leave imposes a motherhood penalty in terms of women’s labor market opportunities.