Effect of Parental Leave Policy Reform on Labor Market Outcomes and Higher-Order Births in Japan

Yukiko Asai, University of Tokyo

The focus of this analysis is the effect of the parental leave reform on labor market outcomes and higher order births. In order to boost up the women's return-to-work rate after childbirth, the government increased the cash stipend for women who return to work to 50% of their previous earnings in 2007. On the other hand, women who did not return only receive 30% of those. Using Keio Household Panel data for 2004-2010, I find no effect of the reform on return-to-work and fertility. This was caused by lack of announcement by government since most people did not know about the reform, and the increase in cash stipend was too small to compensate the opportunity cost to have a baby and to take a leave from work. This study suggests that in order to give incentive women to return to work, the government has to take drastic reform.