Extended Maternity Leave and Female Labour Supply: Evidence From a Regional Policy in China

ABSTRACT Maternity leave for women has been substantially extended in China since the 2016 maternity leave reform, but maternity leave length varies greatly across regions. On the one hand, women are more likely to engage in employment due to extended maternity leave. On the other hand, extended maternity leave can increase the discrimination against women in the labour market and force them to enter into entrepreneurship. Exploiting the 2016 maternity leave reform as an exogenous change in maternity leave for women and employing a difference‐in‐differences framework, this study examines the effect of extended maternity leave on female labour force participation. Using data from the China Migrants Dynamic Survey, we find that the maternity leave reform leads to an increase in entrepreneurship rate (employment rate) by 4.74 (1.76) percentage points for women without children, whereas this effect is insignificant for women with children and old women.