Parental Leave Reforms and the Employment of New
Mothers: Quasi-experimental Evidence from JapanISS Discussion Paper Series F-169
University of Tokyo
Yukiko Asai
Institute of Social Science
University of Tokyoy_asai@iss.u-tokyo.ac.jp

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

Parental Leave Reforms and the Employment of New
Mothers: Quasi-experimental Evidence from JapanI
Yukiko Asai∗

Abstract
This study assesses the impact of changes in the parental leave income replacement
rate on job continuity of new mothers’ after childbearing. The Japanese government
increased the parental leave income replacement rate from 0% to 25% in 1995 andfrom 25% to 40% in 2001, creating two natural experiments. I identify the causal
effects of these reforms by comparing the changes in the regular employment ofmothers who gave birth after the reforms and those who gave birth before thereforms. My results suggest that the two reforms had no significant effects on thejob continuity of mothers who qualified for the reforms.
Keywords: Parental leave, Income replacement, Job continuity, Labour supply
JEL: J13, J21, J22

IThis version: January 2014. The author would like to thank David Card, Takao Kato, Hideo
Owan, Shintaro Yamaguchi, Murat Kirdar, Nicole Schneeweis, Cedric Gorinas, Niklas Kaunitz,
Izumi Yokoyama, the editor, anonymous referees and seminar participants at University of California Berkeley, 18th Annual Meetings Society of Labor Economists (SOLE), 25th annual Conferenceof the European Association of Labour Economists (EALE) and 8th Applied Econometrics Conference(Hitotsubashi University) for useful comments and suggestions on an earlier version of thispaper. The National Statistics Center of Japan, in accordance with the Statistics Act, provided
the data of Employment Status Survey conducted by the Statistics Bureau, Ministry of Internal
Affairs and Communications. The author is responsible for all remaining errors.
∗
University of Tokyo, Institute of Social Science, Hongo 7-3-1, Bunkyo-ku, Tokyo 1130033
Japan. E-mail: y asai@iss.u-tokyo.ac.jp

Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

1. Introduction
The focus of this study is job-protected Parental Leave (PL) for mothers andhow the rate of PL income replacement affects mothers’ job continuity surrounding
childbirth. The Japanese government enacted a number of PL provision reforms
over a short period of time to boost the low maternal employment rate. I conducted
an empirical analysis of two policy reforms: the PL income replacement rate increase
from 0% to 25% in 1995, and the increase from 25% to 40% in 2001. Before and after the reforms, the maximum duration for job protection and eligibility for benefits
were unchanged. Therefore, I can measure the causal effects of an increase in income
replacement on the job continuity of mothers. I study the mothers who gave birth
before the reforms and those who gave birth after the reforms, and examine how
they stay employed during PL (i.e. maternal employment includes mothers who areemployed but on leave), and return to work to their previous employer after their
PL expires. Because PL is a national program and paid for by the government, themothers’ eligibility depends on the timing of childbirth, and not on their choice of
employer or region. Moreover, because of the timing of the reform enforcement, it
was difficult for mothers to select the timing of childbirth. Therefore, it is less likelythat the timing of births will be correlated with the mothers’ unobserved characteristics, and thus, these policy reforms present us with a quasi-experiment. Finally,
this research also adds to the previous literature in that it focuses on a country witha very low maternal employment rate and limited availability of childcare, but a2
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

relatively generous PL program.
The PL provisions, such as financial support and duration of job-protection, differ
greatly by country. Some programs are mandated by national or regional laws, andothers voluntarily provided by employers. The changes in PL provisions and how
they affect the labour supply of mothers form our central policy discussion. Job
protection guarantees the right of a new mother to return to her previous employer
after childbirth. Income replacement provides financial support for new mothers
to remain employed but stay at home with their newborn child when the value of
their time with the child is high. However, when mothers are not actually at work,
their human capital might depreciate and their preferences might change. Therefore,a prolonged period of PL might decrease labour supply and harm the subsequent
wages of mothers.
The Japanese paid job-protected PL allows new mothers to stay at home until
the newborn child reaches the age of exactly one year, and guarantees the mothers’
right to return to work with their previous employer after their PL expires. The
provision has two particular features. First, mothers can take PL and receive income
replacement if they commit to return to work with their previous employer. A newmother must decide whether to take PL at least one month before her expected
delivery date. She must submit a leave application along with proof of her postbirth employment contract, which would then make it difficult for her to falsify andterminate her contract after taking PL. Second, PL is mandated by the government
and paid for by the national employment insurance program, so when a mother takes
3
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

PL, there is no increase in her employer’s insurance premiums. Companies do notdiscourage new mothers from taking PL because it will not result in a cost increase
for them, and moreover, the cost is not likely to be shifted to the mothers’ wages.1
Unreasonable wage reductions and the discharge of female workers on account ofchildbirth are prohibited by law. The proportion of employers offering additional
monthly compensation to new mothers is less than 10%; thus, the income of mostmothers while on PL does not depend on their employers but on the rate of income
replacement, determined on the mothers’ pre-birth income.
Under these PL provisions, a rise in income replacement rate increases the incentive of expecting mothers who otherwise would have quitted their job to stay
employed under PL and return to work to the same employer after their PL expires.
Despite generous increases in the income replacement rate, I found no significant
effect of the reforms on the job continuity of mothers who qualified for the reforms
compared to those who did not qualify for the reforms. I confirmed the robustnessof my results by checking for the presence of time trends and economic shocks withfathers and non-childbearing women as comparison groups, and by investigating forthe presence of pre-reform trends.
1

In the United States, Gruber (1994) found that the costs of adding maternity benefit were

shifted to the wages of the groups that benefited.

4
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

2. Theoretical Framework
New mothers decide to take PL and return to work to their previous employer
when their expected utility from working Uw exceeds their expected utility from notworking Un . For simplicity, I assume that a mother will take PL for the maximum
period, that is, until her child’s first birthday. Mothers maximize their utility fromthe childbirth year (t = 0; 0-11 months since birth), to one year after birth (t = 1;
12-23 months since birth). Taking care of one’s own child is deemed a leisure activity.
When a woman has a child, she has to bear the cost of childcare. If she works, she
has to use external childcare services. For simplicity, childcare cost is defined as afixed cost, because childcare facilities in Japan require mothers to pay by the day
rather than by the hour. If the mother does not work, she will provide childcare
herself (Boeri and van Ours (2013)). In the Japanese system, a mother has to decide
whether to take PL not later than one month prior to the expected delivery date.
The mother will receive income replacement, r, only if she commits to return towork after childbirth; that is, h1 > 0, where h denotes work hours. She compares
the consumption and value of leisure from t = 0 to t = 1, and will return to workwhen t = 1 and the following equation is satisfied:Uw,0 (N0 + r · I[h1 > 0], l0 ) + Uw,1 (W1 (T1 − l1 ) + N1 − cc1 · I[h1 > 0], l1 )(1)
−Un,0 (N0 , l0 ) − Un,1 (N1 , l1 ) > 0
where N is non-labour income, W is hourly wage, cc is cost of childcare and I is
an indicator function. The introduction of r increases the incentive to work. When
5
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

there is no r, a mother who does not want to work when her child is younger (whenthe marginal utility of leisure is high) has Uw,1 − Un,1 < 0. However, when there isr, those mothers re-evaluate their expected utility, and some mothers might choose
to work. When r is increased to r + 4r, some mothers might want to increase theirleisure and not want to return to work. However, if a mother does not return towork, then r = 0. Note that if a mother quits the current job and takes a new job,then r = 0.2 Therefore, the two reforms might encourage mothers who previously
quit their jobs to stay employed under PL and return to their previous employer.
If I relax the assumption that ’all mothers take PL for the maximum duration’,mothers can either return to work at t = 0 or t = 1. The two reforms might induce
the mothers to stay at home longer, and a greater proportion of mothers might
return to work at t = 1 instead of t = 0.
The magnitude of increase in r is shown in Figure 1. Income replacement is paid
as a monthly stipend consisting of two parts: one paid during the PL period, andthe other paid as a lump-sum six months after returning to work. The 1995 reform,
raised the income replacement rate from 0% to 25%, 20% paid during the leave
period, and the remaining 5% paid as a lump-sum upon return to work. With the2

It is also assumed that wages from alternative jobs will be lower than those of the current

job. The Japanese labour market is not flexible-it is difficult to find regular employment, and nonregular jobs do not pay as well. Thus, wages offered from new employers tend to be considerably
lower than those of one’s current job. Therefore, mothers’ wages are higher when they continue
working at their pre-birth employer after giving birth than if they take a new job.

6
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

Figure 1: Mothers’ Monthly Income Surrounding ChildbirthNote: The vertical axis denotes mothers’ income as a % of pre-childbirth income and the horizontal
axis is months since childbirth (childbirth month is denoted as 0). Mothers can only take PL andreceive income replacement conditional on the promise of returning to work to the previous employer, hence, their decision to return to work is based on the total amount of income replacement.
For this reason, I combine the income replacement during leave and the lump-sum payment for the
total in the figure. Note that the Maternity Leave benefit will cover 60% of a mother’s previous
income for 42 days before and 56 days after the birth.

2001 reform, the rate was increased by 15 percentage points to 40%, 30% paid during
the leave period and the remaining 10% paid as a lump-sum. As discussed previously,
in order to receive r, mothers must commit to return to work not later than one
month before their expected delivery date; hence, both the monthly and lump-sum
PL income replacement payments depend on the mothers’ pre-birth decision. For
this reason, I focus on the effect of total income replacement on the job continuityof mothers.
7
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

3. Previous Literature
PL provisions differ in terms of duration, amount paid, and degree of job protection. The maximum duration of job-protection as well as cash benefits under
PL programs determine mothers’ labour supply. Europe and Canada have generous
programs, whereas the United States has a restricted program.3 Previous Studies
on PL and mothers’ labour supply were conducted primarily using North Americanand European data.4 Relatively few studies have examined job continuity (namely,
mothers’ returning to work at pre-birth employer).
Baker and Milligan (2008) find that the entitlement to both short and long jobprotected leave increases job continuity with the previous employer.5 Schonberg
3

In the United States, FMLA provides 12 weeks of unpaid job-protected maternity leave (ML)to employees in companies with more than 50 employees. Canada provides 15 weeks of paid ML
and 35 weeks of paid PL, and job protection duration varies by province. Germany provides paid
ML of 6 weeks before and 8 weeks after childbirth, and PL with flat transfer for a maximum
duration of 24 months, and 36 months of job-protection. The Japanese program is generous andin line with the Canadian program.
4

Previous Japanese studies identified the causal effects of PL provision by comparing women

working for a company that voluntarily provided PL with women working for companies that didnot (before 1992, PL was not mandated by the government). However, those estimates may sufferfrom unobserved differences in mothers who gain employment at companies offering PL.
5

In one of their estimation results, they showed that extending job protected leave from 17-

18 weeks to 29-52 weeks induces some women who previously returned to work but with other
employers to now return to the pre-birth employer. Their dependent variable is an indicator for
mothers being employed and at work the fourth months following the month of birth.

8
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)and Ludsteck (2007) find that an expansion of paid/job-protected period increases
the probability that a woman will work for her pre-birth employer shortly after PL
expires; however, many women leave their pre-birth employer soon after they return
to work.6 Waldfogel et al. (1999) find that leave coverage increase job continuity.
A number of studies on mothers’ return-to-work decisions (including returnto-work with other employers) find that changes in PL provision affect their timeaway from work. An extension of the maximum duration of paid leave and/or job
protection makes mothers stay at home longer and remain employed under PL anddelays their return to work (Schonberg and Ludsteck (2007), Baker and Milligan(2008), Hanratty and Trzcinski (2009), Lalive and Zweimuller (2009), Lalive et al.
(2013)).7 The extension of PL duration increases the duration of leave taken andtime spent at home; however, studies find that the likelihood of mothers returning towork after their PL expires does not change significantly because of such extension(Schonberg and Ludsteck (2007), Hanratty and Trzcinski (2009)). A prolonged paid
job-protected PL may decrease the likelihood of mothers returning to work after
6

They interpret this result in two ways: first, some firms might lay off mothers soon after they

return to work; second, mothers might play the system and return to work only in order to qualify
for unemployment benefits. Whether either one of these hypothesis is true remains unknown.
7

On the other hand, studies on the United States have shown that a short and unpaid job-protected PL does not have a significant impact on mothers’ labour supply. For example, Klerman
and Leibowitz (1997) investigated the labour supply effect of the United States’ FMLA and foundno statistically significant effect on employment, on leave, or at work. Baum (2003) found similar
results of small and insignificant effects on employment.

9
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

the PL expires, partly because it may induce them to have another child and partly
because when mothers are away from work, their human capital might depreciate andtheir preferences might change.8 Lalive and Zweimuller (2009) shows that extending
mothers’ paid job-protected PL from one year to two years reduces the likelihood of
their returning to work.
The present study contributes to the literature in two ways. First, it investigates
how mothers’ job-continuity surrounding childbirth -including after PL expiredvaries with income replacement when the maximum duration of paid and jobprotection remain unchanged. PL income replacement in Japan can be considered agovernment subsidy provided to new mothers conditional on their promise to return
to work with their pre-birth employer. Therefore, it provides stronger incentives
for mothers to stay employed during PL and to return to their previous employer
after PL, which, in turn, could help mothers to preserve their job-specific humancapital surrounding childbirth. Second, this study examines a country, Japan, in
which the PL provision is generous but the maternal employment rate is very low
and, therefore, public policies may have a larger impact on mothers’ labour supply
than in other countries. According to the OECD, the Japanese maternal employment rate for mothers with children three years of age or younger was 29.8%, which
is approximately 30 percentage points lower than the average in OECD countries.
8

Using aggregate data, Ruhm (1998) finds that PL is associated with increases in female em-

ployment, but with reductions in their relative wages at extended durations in European countries.

10
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

The female employment rate in 2005 for those aged 25 to 49 was 65.7%, which isapproximately 10 percentage points lower than the OECD average. This study also
provides insights into the impacts of family policies on mothers’ labour supply underlimited availability of childcare facilities.

4. Parental Leave Policy in Japan
4.1. Job Protection and Income Replacement
Pregnant women can take advantage of paid job-protected PL in Japan. The
PL program in Japan is mandated by the Child Care and Family Care Leave Act(1992).9 Under this Act, mothers can take PL of up to 10 months after ML (whichis 42 days before and 56 days after childbirth).10 The leave starting date can be
adjusted based on the expected delivery date, therefore mothers cannot perfectly
9

A list of recent reforms are in the appendix. The eligibility for PL was expanded to include

non-regular employees, and the maximum duration of PL was extended to 16 months in 2005. The
income replacement rate was increased from 40% to 50% in 2007. In 2010, the monthly income
replacement during PL and the lump-sum income replacement were combined, and currently only
monthly PL income replacement payments are made. These reforms are not the focus of my study,
but should be reviewed in future analyses.
10

ML is mandated by the Labour Standards Act (1947), and it is illegal to work or to allow

a new mother to work within 42 days of childbirth. ML is mainly provided for maternal healthreasons. During ML, the ML income replacement is provided by the Health Insurance Program(1958-) and is equivalent to 60% of a mother’s pre-birth income. The ML income replacement rate
was 60% from its inception in 1958 until April 2007, when it was increased to two-thirds of the
pre-birth income. ML is available to all working mothers, including non-regular employees.

11
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

plan the timing of their leave. Mothers have to return to work by the day after thechild reaches exactly 12 months of age.11 The actual PL take-up rate is unknown.
MHLW (2002) showed that 64.0% of mothers who had a child during April 2001March 2002 claimed PL, although the actual percentage of mothers who take PL
out of those who qualify for it is estimated to be higher.
PL income replacement is paid through the national employment insurance, andPL rights are available only to the new mothers who are covered under the employment insurance program, i.e. the regular employees. The benefits are determinedin accordance with the mother’s average monthly wage for the six months prior tochildbirth. The program has set the maximum monthly wage as 430,200 yen andthe minimum as 69,900 yen.12 According to the Basic Survey on Wage Structure(2010), the mean wage for females aged 20-39 is 219,300 yen, with the proportionof those earning above 400,000 yen only 1.69%. Therefore, most mothers receive
income transfer proportional to their income. Note that income replacement is nontaxable, and therefore the incentive to mothers is proportionally dependent on where
they stand in income distribution. Childcare cost is also proportional to income but
varies by region, and by whether the service is public or private. Public childcare
cost takes up about 10% of working mothers’ income, averages 20,000-30,000 yen permonth. Private childcare cost takes up about 20% of working mothers’ income, av11

Fathers are also eligible to take PL, but the take-up rate by fathers was only 0.33% in2001(MHLW (2002)), and thus this study only focuses on mothers.
12

The maximum and minimum amounts change very slightly every August.

12
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

erages 30,000-50,000 yen per month. Most mothers’ PL income replacement do notdepend on their employer; the proportion of companies offering additional monthly
income replacement was only 7.5%, with another 3.5% offering a lump-sum payment,such as a small amount of cash as a maternity gift (MHLW (2002)).

4.2. Return to Work Commitment
A new mother must decide whether or not to take PL and return to work afterchildbirth at least one month before the expected delivery date, and must submit
her PL application to her company. Based on her decision, the company submits
the leave application to the government along with proof of the woman’s post-birth
employment contract. New mothers are also asked to submit the Maternal and Child
Health Handbook, which is completed by their gynaecologist, to prevent them fromproviding a false expected delivery date. Although the submission deadline for theleave application is one month prior to the expected date of delivery, most expecting
mothers make their post-birth employment decision before the pre-ML period, which
is at least two to three months before the expected delivery date, owing to thebureaucratic processes and social pressures of companies. For example, expecting
mothers who plan to quit their job must transfer their responsibilities to and train
a replacement.
Strictly speaking, there is no punishment for a new mother not returning to her
previous employer. The mother will not receive the lump-sum payment, but she does
not have to reimburse the PL benefit. However, due to the bureaucratic processes

13
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)and social pressures in Japanese companies, mothers would find it very difficult not
to return after making a commitment to return. The exact rate of mothers who
commit to return but do not is not disclosed by the government, but the numberof mothers who receive the PL payment and the lump-sum payment are close in
number; the difference is only about 15%.13 Furthermore, the psychological costof not returning is very high. If a mother quits her job during PL, her company
terminates her contract immediately, and thereafter she will not receive income
replacement. Mothers who decide not to return after taking PL must inform thecompany their decision at least two to three months before their due date to returnto-work. If a mother does not return to her previous employer after PL, she will not
be likely to find a new job, because during the hiring process, most companies ask
for references from previous employers. Taking account of these factors, only rarely
does a mother decide not to return to work at the end of her PL.
13

According to the Employment Insurance Report, the number of mothers who received PL

payment for the first time was 77,944 from June 2001 to March 2002, and the number who claimed
the return to work benefit was 66,422 from October 2002 to July 2003. Thus, the estimated return
to work rate among who received PL payment is about 85%. Note that the rate is calculated basedon the assumption that all mothers take leave until their child reaches age one, and submit thereturn to work payment application form soon after 6 months have passed since their return to
work.

14
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

5. Data
5.1. Description of Data
The data in this study come from the Japanese Employment Status Survey(ESS), which was conducted by the Statistics Bureau on household members 15
years of age or older in approximately 440,000 households in 1997 and 2002. Of
those, 80% of the responses are accessible for research purposes; the total numberof individuals available after re-sampling was 795,933 in 1997 and 752,068 in 2002.
Sampling weights are used to compensate for unequal selection probabilities.14
The survey is conducted on October 1st of each year and age is counted in fullyears as of September 30. The detailed retrospective accounts of the respondents’
employment status information are available in the survey data, from which I havecreated individual panel data sets based on the age of each newborn child, and themothers’ current and past employment status, job tenure, quitting dates, and thestarting dates for both the current and past jobs, for their first and second children
separately. The individual birth months of the children are unidentifiable; however,since the children’s age at the time of the survey are available, I can correctly identify
the timing of each childbirth and the dates the new mothers were supposed to return
to work, because all mothers must return to work by the day following the child’s
first birthday. The data on mothers’ regular employment status from three years
14

Households containing more than eight persons or with more than three household members

the same age are excluded from the re-sample.

15
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

Policy enforcement date:
1 January 2001

Policy amendement date:
12 May 2000

Lump-sum PL
income replacement5%

Has 3-year-old child-2002 data

10 11 12 1
1998

2

3

4

5

6

Lump-sum PL income
replacement 10%

Income replacement
during PL 20%

Income replacement
during PL 30%

Has 2-year-old child-2002 data

78

9 10 11 12 1

1999

2

3

4

Has 0-year-old child-2002 data

Has 1-year-old child-2002 data

5

6

7

8

9 10 11 12 1

2000

2

3

4

5

6

7

8

9 10 11 12 1

2001

2

3

4

5

6

t
7

8

2002

Pregnancy
thresholdMothers who gave birth during the period
Mothers who gave birth during the period(marked as black) qualify for ‘income replacement during PL’ reform; the starting date of PL is 1 January 2001, or later(marked as grey) qualify for ‘lump-sum PL income replacement’ reform; have to return to work on 1 January 2001, or after

Figure 2: Identification Strategy and Data Structure of the 2001 Reform

Note: Data are from the ESS 2002. Based on the child’s age in the 2002 data, the date of childbirth(horizontal axis) is identified. The policy was amended in May 2000 and enacted in January 2001.
The figure for the 1995 Reform is shown in the appendix.

before childbirth to one year after are constructed based on each mother’s childbirthdate. The mothers on job-protected leave are recorded as employed.
The method used to construct the data is shown in Figure 2; for example, amother who has a child aged 0 (as of 30 September 2002, the survey date) is coded
as delivering between October 2001 and September 2002; a mother who has a twoyear-old child is coded as delivering between October 1999 and September 2000, andso on. The year and month given under the horizontal line denote the childbirthdate; the arrowed lines denote the policy amendment and policy enforcement dates.
The solid line in the middle divides the mothers into two groups: those who qualify
for the reform and those who do not.
Tenure information is available on a monthly basis for the 2002 data and yearly16Institute of Social Science, University of Tokyo

9 10 11 12 monthyear

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)basis for the 1997 data; therefore, I first show the 2001 reform results, and then show
the 1995 reform results. Note that because of differences in the questionnaires,
we cannot directly compare the 1997 and 2002 data results. The data have twolimitations: first, wage information is available only for the survey year, as a rangeof numerical values; therefore, wage information cannot be included in the model.
However, wages tend to be determined based on seniority, industry, and company
size in Japan. Therefore, including this information instead of wage information
reduces the potential unobservable effects. Second, the respondents’ age is recorded
in five-year ranges (e.g. 20-24, 25-29, 30-34, or 35-39; however, each child’s age
is recorded as an exact number), but this is unlikely to cause biased estimates
because, according to the Vital Statistics, in 2000, the proportion of mothers giving
birth under the age of 19 years old was only 1.66% and the proportion of those
aged above 40, 1.28%. Therefore, by restricting the sample to mothers who gavebirth and constructing panel data for each mother for her first and second childseparately, we can capture the data of mothers who gave birth when aged 20-39. In
addition, I compare the mothers who gave birth before and after the reforms with a
one-year time window, so the bias resulting from these limitations can be consideredsmall. Furthermore, in Japan, a majority of newly hired regular employees acquire
their jobs right after graduation, and a regular employment job transfer is unusual.
Therefore, by including data on education level and tenure, we can capture the17
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

data on age.15 Despite the limitations, this dataset has merits because it is basedon a nationally representative government survey and can be used to investigate
employment in Japan, which is still unfamiliar to most people outside Japan. The
data can provide new insights into the labour supply of females and its relation withfamily leave policies from the perspective of a developed Asian country.

5.2. Overview of Employment and Job Continuity
I limit this study to mothers with regular employment, because only regular
employees are eligible for PL. Regular employees are hired without a predetermined
period of employment, work for scheduled hours, are full-time and covered by social
insurance programs; the so-called ’lifetime’ stable employment. The government
introduced the PL reforms in order to increase mothers’ regular employment rate,
because the ’lifetime’ employment and seniority-based career advancement system
in Japan have made it difficult for workers to return as regular employees once theyquit. Workers who quit their jobs and then return to the labour market, mostly
take up new non-regular jobs. Non-regular employees are part-time or fixed/shortterm employees, are paid less and are eligible for fewer social insurance programs.
Figure 3(1) shows the employment-to-population ratio and regular-employment15

According to the Monbu Kagaku Tokei Yoran, the female high-school advancement rate is

97% (high school students are aged 16-18). High-school graduates either find employment rightafter graduation or go to higher education, and the college entry age is typically 19-20. University graduates also find employment upon graduation, as the labour market greatly values new
graduates.

18
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

to-population ratio calculated for each age category from the 2002 data.

The

employment-to-population ratio includes both regular and non-regular employment.
The employment rate for females in their 20s is about 68%, but it decreases to 57%
during the childbearing years (age 30-34) and slightly rebounds to 61% after age
35. In contrast, the regular employment rate for females in their 20s is about 39%;
the rate decreases to 28% for females aged 30-34, and become even lower, 24%, forthose aged 35-39. The regular-employment-to-population ratio shows no increase
after age 35, indicating that mothers either remain unemployed or take up nonregular employment after giving birth. Thus, it is important to improve the work
incentives for mothers with regular employment so that they stay employed during
their childbearing period, and maintain a life-long career.
Figure 3(2) gives an example of how the status of regular employment changes
over time. The figure shows the number of women and men aged 25-29 with regular employment in 1997, and how many of them remained in the same jobs one
to five years later (aged 30-34 in 2002). If the men/women had any children during those five years, they were categorized as fathers/mothers. Over the five-year
period, while most males remained in their jobs, approximately 7% either left theircompanies or were fired. In contrast, female job continuity declined substantially.
Japanese women are generally less attached to the labour market because the family’s main breadwinner is typically a man, and there is a significant gender wage
gap. According to the OECD, the gender gap in median earnings for full-time employees was 33.9% in 2000, almost twice the OECD average; Japanese women earn
19
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)(1) Employment-to-Population Rate by Sex(2) Regular Employment Rate Over 5 Years by Sex and Parenthood

100%

100%

90%

90%

80%

80%

70%

70%

60%

60%

50%

50%

40%

40%

30%

Male Employment

20%

Female Employment

10%

All Female

Non-mothers
Mothers

30%

All Male20%

Non-fathers

Male Regular Employment
10%

Female Regular Employment

0%

Fathers

0%

20-24

25-29
30-34
Age group

35-39

1997

1998

1999 Year 2000

2001

2002

Figure 3: Employment-to-Population Rate and Job Continuity

Note: Rates are calculated from the ESS 2002. (1) Employment denotes Employment-to-Population
rate, the percentage of women/men who are employed. Regular Employment denotes regularemployment-to-population rate, the percentage of women/men who are employed as regular employees. (2) Regular employment rates over 5 years (a measure of job continuity) are calculated
for regularly employed women and men aged 25 to 29 in 1997 in the ESS 2002 data. If a person
leaves the company, he/she is counted as having left the job. Means are weighted with the samplingweights.

only two-thirds of what men earn. The proportion of mothers remaining in regular
employment declines to a greater extent than that of non-mothers: approximately
60% of mothers quit working as regular employees whereas only 25% of non-mothers
quit working after five years, strongly suggesting that childbearing is a major factor
in job turnover.

20
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

Rate of income replacement
During PL

Date of childbirth(1) 2001 reform
October 1998-September 1999 birth
October 1999-September 2000 birth
October 2000-September 2001 birth(2) 1995 reform
October 1993-September 1994 birth
October 1995-September 1996 birthLump-sum

TOTAL

20%
20%
30%

5%
10%
10%

25%
30%
40%

0%
20%

0%
5%

0%
25%

Table 1: Empirical Design

6. Identification Strategy
6.1. Empirical Design
To measure the reforms’ causal effects, I consider the variations in the income
replacement rates that resulted from the policy reforms. The mothers’ job continuity
surrounding childbirth -the number of mothers who remain employed under PL andreturn to work after the PL expires- of the treatment mothers who gave birth after
the reforms are compared to a control group of mothers who gave birth before
the reforms. The eligibility of mothers under the reforms varies by the timing ofchildbirth. Moreover, as I will explain later, because of the timing of the policy
reforms, it was very difficult for mothers to select the timing of their childbirth tobecome eligible for the reforms.
The empirical design of this study is described in Table 1. The 2001 reform
was amended on 12 May 2002, and enforced from 1 January 2001; the 1995 reform
was amended on 29 June 1994, and enforced from 1 April 1995. One’s eligibility to
21
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

benefit from either reform is based on the starting date of one’s PL. For the 2001
reform, I consider the mothers who gave birth between October 2000 and September
2001 as my treatment group, and compare the outcomes of this group with thoseof the control group mothers who gave birth between October 1999 and September
2000. The former group of mothers received 40% income replacement while the latterreceived 30%. However, although the control group of mothers received only 20%
income replacement during PL, they received the same 10% lump-sum payment as
the treatment mothers. To examine whether the increase in lump-sum payment had
an effect on the labour supply of mothers and also determine the robustness of myresults, I also compare a second control group with the treatment group, that is, themothers who gave birth between October 1998 and September 1999 and received
only 25% income replacement. For the 1995 reform, the assignment of mothers
to the treatment and control groups differs from that of the 2001 reform because
the policy came into force in April 1995, and the mothers who gave birth between
October 1994 and September 1995 were excluded from the estimates because they
could be placed in either the treatment or control group. Therefore, I consider themothers who gave birth between October 1995 and September 1996 as the treatmentgroup, and compare their outcomes with those of mothers who gave birth between
October 1993 and September 1994.
In this study I measure the extensive margin of labour supply responses to thereforms. If employers allowed their employees greater flexibility in working hours,
the individuals would find it easier to adjust their labour supply along the intensive
22
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

margin. In Japan, the number of working hours is inflexible for most regular employees; therefore, mothers tend to adjust their labour supply along the extensive
margin.
In the following section, I first consider the results of the 2001 reform and thenthose of the 1995 reform. The employment history information is recorded on amonthly basis in the 2002 data and yearly basis in the 1997 data; thus, I obtain amore accurate employment status for the 2001 reform. Furthermore, in comparison
with the 1995 reform, the empirical design of the 2001 reform is well constructed tomeasure the impact around the reform.

6.2. Random Assignment Assumption
Random assignment makes treatment independent of potential outcomes andallows us to estimate the average causal effect of treatment (Angrist and Pischke(2008)). If mothers could change the timing of their conception in order to beeligible for the reform, the birth date would not be random. An increase in thereplacement rate might increase the labour supply of females planning to become
pregnant as well and thus might affect the composition of mothers. To confirm thatthe group assignment is random, I investigate (1) whether there was self-selection
into the treatment group, (2) whether the characteristics of the treatment mothers
and control mothers are identical, and (3) whether the reform induced more women
to give birth.
Figure 2 shows the reform amendment date, the enforcement date, and the data

23
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

structure, to confirm that the reform was not amended early enough to change thepregnancy timing of women. Mothers who took PL on or after 1 January 2001,
qualified for the post-reform level of during PL income replacement (an increase
from 20% to 30%), and those who returned to work on or after 1 January 2001,
qualified for the post-reform lump-sum payment (an increase from 5% to 10%). As
the duration of a pregnancy is 9-10 months,16 mothers who gave birth after October2000 (marked in black) qualified for the full increase in income replacement andreceived 40% income replacement. In order to deliver a child in October 2000 orlater, a mother must conceive in December 1999 or later (the pregnancy thresholddenoted in Figure 2). Since the policy was amended on 12 May 2000, the mothers
who gave birth between October 1999 and September 2000 (i.e. those who conceived
between December 1998 and November 1999) could not control the timing of theirdelivery in order to qualify for the 2001 reform. Note that the mothers who gavebirth in October 2000 could be either in the treatment group or control group, butthey could utilize their unused paid holidays to delay their PL starting date andthus be included in the treatment group. The average number of paid holidays is20; by combining them with public holidays, a woman could easily delay her PL
starting date by about one month. The second control group mothers, who gavebirth between October 1998 and September 1999, could not control the timing of
16

The typical pregnancy lasts about 280 days (40 weeks) from the first day of last menstrual

period, and the median is about 268 days from ovulation. However the period varies by up to 37
days. (Jukic et al. (2013)).

24
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

their delivery to qualify for the reform either, as they had already given birth when
the policy was amended.
I also checked to see if there was any announcement effect. According to thefour major Japanese newspapers,17 the public became aware of the proposal forthe 2001 reform only on 6 December 1999; note that the pregnancy threshold was
1 December 1999. Hence, mothers could not control the timing of conception toqualify for the reform. For the 1995 reform, control mothers could not control theirtiming of conception to qualify either.18
If there were self-selection into the treatment group, the means of the treatment
and control groups could be significantly different. Table 2 shows the means of the
key characteristics of the treatment and control mothers and the t-statistics for the17

Nikkei, Yomiuri, Asahi and Mainichi

18

Mothers who started their PL on April 1st 1995 or later qualified for both the post-reform

during PL income replacement (increased from 0% to 20%) and the post-reform lump-sum PL
replacement (increased from 0% to 5%), and thus mothers who delivered babies in January 1995
or later qualified for the reform. To deliver a baby January 1995 or later, a mother had to bepregnant in March 1994 or later. As the policy was amended on June 29, 1994, a control mother who
gave birth between October 1993 and September 1994 (i.e. became pregnant between December
1992 and November 1993) could not control the timing of her birth to qualify for the reform.
While mothers who gave birth in January 1995 could be either in the treatment or control group,
those mothers could use their unused paid holidays to delay their PL starting date. Newspapers
announced the reform proposal on December 1, 1993, which is a bit earlier than the pregnancy
threshold. However, this will not pose a problem for this study because control mothers werealready pregnant when the reform proposal was announced.

25
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)group differences in mean. The two groups of mothers are almost identical in bothreforms. The only noticeable difference between the two groups is in the proportionof those working in the manufacturing and service industries for the 2001 reform.
The mean differences in those variables for the treatment and control mothers are
significant but small.
To examine whether the two reforms induced more women to give birth, I compare the frequency of births during the period. According to Vital Statistics, I foundno spike in the number of births around the threshold of the 2001 reform,19 further
confirming that there was no significant self-selection into the treatment group that
could detrimentally affect the comparison of the treatment and control group mothers. No increase in births was found in the ESS data either: 7.0% (first birth: 3.0%)of females aged 20-39 gave birth between October 1999 and September 2000, and6.8% (first birth: 2.9%) gave birth between October 2000 and September 2001; thedifference is not significantly different from zero. No spike was seen around the1995 reform too.20 I also checked the number of eligible mothers, that is, regular19

The number of births from October 1999 to September 2000 was 1,190,077(103,131 in Septem-

ber 2000 only) and about 7.0% of females aged 20-39 gave birth; from October 2000-September 2001
was 1,173,366 (100,752 in October 2000 only) and about 6.9% of females aged 20-39 gave birth).
Therefore, there was no significant increase in births around the 2001 reform. Note that while thenumber of births is the actual number taken from the birth registry, the monthly population isunavailable and is based on an approximation from the census population.
20

The number of births from January 1994 to December 1994 was 1,238,328 (104,424 in December

1994 only) and about 7.4% of females aged 20-39 gave birth; the number from January 1995 to26
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

employment, before and after the reform to verify whether the composition of thisgroup changed. The proportion of regular employment three years before childbirth
was not significantly different between the treatment and control groups, at about
45%, confirming the satisfaction of local randomisation.
2001 Reform
Control

Education University / College Graduates
High School Graduates
Pre-birth Characteristics (3 Years Before)
Tenure (years)
Company size Less than 30 employees
30-299 employees
More than 300 employees
Public office
Industry Manufacturing
Service
Sample size

Treatment

0.579
0.421

0.569
0.431

4.167
0.189
0.303
0.405
0.102
0.264
0.736
1393

4.192
0.209
0.299
0.398
0.095
0.229
0.771
1298

1995 Reform
Treatment

t
0.18
0.18

Control

0.452
0.548

0.482
0.518

0.03
1.00
0.04
0.09
0.26
2.67
2.67

3.299
0.247
0.278
0.392
0.082
0.251
0.749
1809

3.472
0.252
0.273
0.396
0.079
0.232
0.768
1634

t
1.96
1.96
1.90
0.06
0.07
0.02
0.08
1.13
1.13

Table 2: Means of Key Characteristics

Note: For the 2001 reform, the treatment group comprises mothers who gave birth between October2000 and September 2001, and the control group is mothers who gave birth between October 1999
and September 2000. For the 1995 reform, the treatment group comprises mothers who gave birth
between October 1995 and September 1996, and the control group is mothers who gave birth between
October 1993 and September 1994. t is the test of equality of means between two groups. Meansare weighted with the sampling weights.

December 1995 was 1,187,064 (102,692 in January 1995 only) and about 7.1% of females aged
20-39 gave birth.

27
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

6.3. Estimating Models
Using the panel data structure, I examine how the women remain employed with
their previous employers during the years around their giving birth. I restrict myattention to those with regular employment three years before giving birth. The
employment insurance program states that persons with (1) less than one year ofcontinuous employment, (2) a contract that will terminate in less than a year, and(3) less than two days of work per week can be excluded from the PL program
under the labour-management agreements between the employees and employers.21
Mothers with regular employment three years before childbirth will have more than
one year of tenure before the birth and qualify to receive PL income replacement.
The average age of first-time mothers was 28.2 in 2001; since most mothers will haveworked for at least three years after completion of their education, this restriction is
not strong, and does not create a serious selection bias. My focus is also on mothers
having their first child.22 I estimate the following probit equation for each reform
separately:
21

Labour-management agreements in Japan are agreements between employees and employers.

In contrast, collective bargaining agreements are negotiated by unions and employers at the company level. 18% of workers are members of labour unions, which are primarily formed in companies
with more than 1,000 employees (50%). Companies tend to formulate their own rules on the basisof labour-management agreements.
22

Results for mothers having their second child are similar and shown in the appendix.

28
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

P (Eit = 1) = Φ(ρ · Ref ormt + Xit β)(2)where Eit is the outcome variable for individual i in childbirth group t, taking avalue of 1 when the mother remains in regular employment with the same employer
and 0 otherwise (this is a job continuity measure). Those on leave are includedin the employed category. I define this variable for two years before childbirth,
one year before childbirth, childbirth year, and one year after childbirth to capture
how mothers remain employed with the same employers surrounding childbirth.
Ref orm represents a 0/1 indicator of reform eligibility and captures the average
effect of the reform. Since job-protection lasts until the child’s first birthday, allmothers have to return to work one year after the birth. A mother not having
a regular employment one year after birth is one who did not return to her prebirth employer. If the increased PL payments based on the reforms increase thenumber of mothers remaining employed under PL (and then quit when the PL
expires), that can be captured from the composition of the pre-birth-year and birthyear employment rate. X denotes the vector of mothers’ characteristics (educationlevel, job tenure, size of the company, and industry) measured three years before
childbirth;23 it controls for the observable characteristics affecting the employment
response. I separately estimate regressions for comparison of (1)the treatment and23

Because of the data limitation mentioned in the previous section, the estimates shown do notinclude age information. Note that models including age category dummies at survey year did notchange the results.

29
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

control groups for the 2001 reform, (2)the treatment and second control groups forthe 2001 reform, and (3)the treatment and control groups for the 1995 reform.
To control for any time shocks that may have existed around the treatment
period, I take fathers and non-mothers as the comparison groups and examine theiremployment status before and after the reforms compared to that of mothers. The
panel data of fathers are created using the same procedure as that for mothers,
based on the age of each newborn child, and their current and past employment
status, job tenure, quitting dates, and the starting dates for both their current andpast jobs. I create a panel data of non-mothers (who are unaffected by the reforms,
either before or after) by randomly assigning them to one of two groups; using amatching algorithm, I chose a sample of women with regular employment who havenot given birth but have characteristics similar to those of mothers.24 This helps
me solve the problem of some non-mothers who could possibly be in either group
because the data are taken from retrospective accounts of employment data.
I include these two comparison groups using a difference-in-difference probit
model that includes the interactions between a mother and reform indicator:

P (Eitm = 1) = Φ(β1 ·Ref ormt +β2 ·M otherm +γ ·Ref ormt xM otherm +Xitm β) (3)where M other takes a value of 1 for mothers and 0 otherwise, and represents thegroup fixed effect. The father or non-mother models run separately. γ captures all
24

I conducted 1 by 1 exact matching based on women’s observed characteristics.

30
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)the variations in the job continuity of mothers in the treatment group, that is, theimpact of the reform after taking into account the time and macroeconomic shocks.
Regressing the job continuity variables on group (cluster) level characteristics
without considering the intragroup correlation of the errors result in a downward
bias in the standard errors (Moulton (1990), Bertrand et al. (2004), Donald and Lang(2007), Conley and Taber (2011), Angrist and Pischke (2008)). The observations
within the same group are not independent, and the inferences are likely to beoverestimated. There are few clusters, and group size is large in this study; therefore,
the inference is based on a t-distribution with G-L degrees of freedom, that is,number of groups minus the number of group constant variables (Donald and Lang(2007)), and compute robust standard errors clustered by group. The critical values
for the tests of significance are drawn from a t-distribution with 2 degrees of freedom
for model (3) with G=4. The critical values for the 1%, 5%, and 10% significancelevels are 9.92, 4.30 and 2.92. For model (2) with G=2 case, it is harmless toinclude the unobserved cluster effect in the estimated treatment effect when thegroup assignment is randomized (Wooldridge (2010)). Therefore, I compute robust
standard errors and use the standard inference method.

7. Results
7.1. A Graphical Comparison of Employment around the Time of Giving BirthFigure 4(1) (upper-left corner panel) presents a graphical comparison of the average regular employment rate for the treatment and control groups for the 2001
31
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

reform. The figure shows the job continuity of mothers- whether they remain employed at the same regular job over a four-year period before and after childbirth.
The employment rate, which includes those mothers on PL, declines substantiallyfrom two years before childbirth to one year after childbirth. Most mothers choose
not to remain employed before childbirth (approximately 70% of mothers terminatedtheir job by the childbirth year). The proportion of mothers continuing work one
year after childbirth (those who return to work after PL expires) for the 2001 reformis 29.7% for the control mothers and 29.6% for the treatment mothers.25 The difference between the treatment and control groups does not seem to be significantly
large. Panels (2) and (3) in Figure 4 present the regular employment rate for fathers
who had a first child and non-mothers in regular employment three years before thetreatment or control period. The group differences in job continuity for fathers andnon-mothers are also small. The group difference for the 1995 reform is also small,as shown in the appendix.26
25

31.4% for the second control mothers.

26

The 1995 reform graph is not directly comparable with the results for the 2001 reform; however,

the results are quite similar to those for the 2001 reform. The employment rate drops to 20.4%
for the control mothers and 22.2% for the treatment mothers one year after childbirth. Therefore,
it seems that the treatment mothers are only slightly more likely to return to work after their
PL expires. However, the non-mothers’ and fathers’ job continuity are also slightly different.
Therefore, after differing out the time trends, the group difference is small.

32
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

7.2. Difference Results
Table 3 shows the difference results for the 2001 and 1995 reforms. The marginal
effects from the probit model shown in the table are from separate regressions conducted for each year surrounding childbirth (marginal effect of Ref orm in model(2)). The coefficients from a linear probability model (LPM) are similar and shownin the appendix. The results reveal that there is no significant difference in job
continuity between the two groups even after controlling for the factors that affect
employment response-the models with covariates. Mothers do not terminate employment, either earlier or later. The likelihood of returning to work after PL showsno increase after the reform. The elasticity calculated from the D estimates results
are almost zero for all models. From Table 3, the percentage change in employment
rate one year after childbirth for treatment mothers is 0.39% (assuming 100% PL
take-up rate).27 The employment rate for the control mothers one year after childbirth is 29.7% and a 33.3% increase in income replacement rate, meaning that theestimated elasticity is 0.039. For the second group of control mothers, the estimatedelasticity is -0.071. The elasticity for the 1995 reform is 0.276. The signs and significances of the other covariates are as expected. The larger the company, the more
likely are mothers to remain employed; the longer the tenure, the more likely aremothers to remain. The manufacturing industry has a higher job continuity rate
than the service industry.
27

The marginal effect is divided by 64% when a 64% take-up rate is assumed

33
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

7.3. Robustness Check
If there are macroeconomic shocks or time trends in the labour market during
this period, the difference results do not identify the causal impacts of the reform.
I use four methods to investigate the robustness of treatment effects: (1) difference
in difference with the fathers having a new child during the period under study; (2)difference in difference with a group of non-childbearing women who have characteristics similar to those of mothers; (3) placebo regression to determine whether any
pre-existing trends detrimental to a comparison of the outcomes exists; (4) estimatesby education level, and for mothers having their second child.
Table 4 shows the difference-in-difference estimates from model(3), using fathers
or non-mothers as the comparison group, running separate regressions. The marginal
effects for the interaction terms (Ref ormxM others) are calculated as in Ai and
Norton (2003). All the results show no significant difference in job continuity- notmuch of a time dimension to worry about when comparing the treatment and control mothers. There might be a mother-specific shock (affecting employment before
childbirth) that systematically differs between the treatment and control groups,
especially for the 1995 reform. For example, during the 1995 reform period, thespousal tax exemption (the tax deduction for the household head with dependent
families) increased slightly. Some companies exert pressure on women to voluntarily
quit their jobs once they got married and the intensity of the pressure could vary inaccordance with economic conditions. These two time-varying factors could potentially affect the job continuity in a different way between the two groups for those
34
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

women who got married within three years before the birth in the sample. To control
for this, I take the differences between two years before childbirth (when the womenare not yet pregnant and no policy effect is expected) and one year after childbirth(when all mothers have to return to work) for each group. The estimating models
simply replace M other in model (3) with Af ter, which takes the values of 1 for one
year after childbirth and 0 for two years before childbirth. I also consider the triple
difference with fathers and non-mothers, by including the full set of the second-levelinteraction with M other and third-level interaction in the estimation model. The
results are shown in Table 5. None of the marginal effects is significantly different
from zero, further confirming that the reform has no significant impact on mothers’
job continuity.
Table 6 shows the placebo difference estimates and the placebo difference-indifference estimates. For each reform, I compare two groups of mothers, all of who
gave birth before the reform, and check for any differences in employment patterns
during that period. The results show that between October 1998-September 1999
and October 1997-September 1998 (row 4 and column 1), the group differences are
significantly different from zero. However, after taking into account the possible
macroeconomic shocks through a difference-in-difference estimation for the comparison groups of fathers and non-mothers (row 4, column 2 or 3), I found no significant
placebo treatment effects. None of the models shows any significant differences in
the relative after-childbirth outcomes of the treatment mothers, and the magnitudesof the coefficients are very small. Thus, there seems to be no significant pre-existing
35
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)time trends that would be detrimental to a comparison of the treatment and control groups for either reform. Note that the difference in outcome between October
1997-September 1998 and October 1996-September 1997 shows that about 10% moremothers remain employed one year before birth, although job continuity during thebirth year and one year after childbirth is not significantly different from zero.
The cost of quitting a job might be higher for mothers with higher-status occupations. To take this heterogeneity into account, I run the models separatelyby education level and obtain similar results: there are no significant differences
between the treatment and control groups. The results for mothers who had theirsecond child also show no significant differences between the two groups. The results
are shown in Table 7.

8. Discussion
Time spent with a child is more valuable when children are younger (Klerman
and Leibowitz (1997)). PL allows mothers to stay at home with their newborn childsurrounding childbirth, and to return to work at their previous employer when thechild grows older. Therefore, PL might encourage mothers who previously would
have quit their jobs (or taken new jobs, mostly of an non-regular and part-timenature) to stay employed under PL and return to their previous employer. PL
promotes job continuity of mothers and helps preserve their job-specific humancapital surrounding childbirth. Previous studies have found that an increase in the
duration of job protection increases job continuity at the pre-birth employer (Baker
36
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)and Milligan (2008)), and an extension of the maximum duration of paid leave
and/or job protection increases time spent with the newborn child (Schonberg andLudsteck (2007), Baker and Milligan (2008), Hanratty and Trzcinski (2009), Lalive
and Zweimuller (2009), Lalive et al. (2013)). Japanese PL reforms, investigated inthis paper, (1) raise the rate of income replacement and (2) ask mothers to commit toreturn to their pre-birth employers in order to take PL. Compared to other countries’
reforms, Japanese PL provides stronger financial incentives for mothers to return totheir pre-birth employers. However, my results show that the reforms do not impact
new mothers’ job continuity surrounding childbirth. This is quite puzzling because
women and mothers in particular are normally sensitive to taxation and benefits(Blundell and Macurdy (1999), Meghir and Phillips (2010)).28
Possible reasons for this are that the reforms increase mothers’ marginal wages
right after childbirth, but do not change anything beyond that period; that is, thereforms do not make it feasible for mothers to remain employed after PL. There
are two major hardships for working mothers in Japan. First, access to childcare
is insufficient; it is difficult to find slots in facilities, especially public ones. Publicchildcare facilities comprise only about half of total childcare facilities, and there
are long waiting lists for places in both public and private facilities. Nannies, oralternative childcare services, are not widely available; fewer than 5% of Japanese28

Many studies focus on single mothers and find that increase in a tax credit has a positiveeffects on their labour force participation (e.g. Eissa and Liebman (1996), Meyer and Rosenbaum(2001), Francesconi and van der Klaauw (2007)).

37
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)families use nannies. This means it is difficult for mothers to find someone who canprovide childcare on short notice, such as when children are sick. In addition, whenpublic childcare facilities are closed, mothers cannot rely on anyone but themselves
to take care of their children. This is challenging for them as illness and accidents
are unpredictable, and business needs are sometimes also unpredictable. The lackof childcare supply has been under discussion for many years in Japan but the
government has not yet solved the problem. Compounding the issue is that there is
still significant social pressure not to use external childcare services, because children
are believed to suffer when mothers work. Another difficulty is that traditionalfamily roles are strongly rooted and mothers are less likely to get support fromhusbands in housework and child-rearing. The share of total hours of houseworkand childcare performed by Japanese husbands is only 12.5%, which is 25 percentage
points lower than in other OECD countries (GEBCO (2007)). In the majority ofeven two-income households, only mothers take care of both their children andhousework. For mothers who work as regular employees in inflexible workplaces,
which is the predominant situation in Japan, it is difficult to reconcile work andfamily responsibilities. Regular employees enjoy life long employment protection
in exchange for a high degree of commitment to work and inflexible work hours.
Short hours are not fully available, and it is difficult to take a day off on short
notice. These cultural and labour market institutions make it infeasible for mothers
to remain employed after childbirth.
In order to increase mothers’ job continuity in the context of low maternal em38
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

ployment and limited availability of childcare in Japan, public spending on improving
access to public childcare might be necessary. Studies have shown that improved
access to public preschools (i.e. an implicit childcare subsidy) increases maternal
employment when female employment is low (Berlinski and Galiani (2007) for Argentina in the late 1990s; Gelbach (2002) for the United States in the 1980s), andwhen both female employment is low and access to childcare is scarce (Nollenberger
and Rodriguez-Planas (2011) for Spain in the early 1990s). A reduction in thecost of childcare via childcare subsidies might also be effective, certainly after thechildcare supply shortage improves. Examining Spain’s income tax reform in 2003,
Sanchez-Mangas and Sanchez-Marcos (2008) and Azmat and Gonzalez (2010)) findthat tax credits increased employment of mothers with children under the age ofthree. Public policy which increases childcare subsidies, together with expanding
access to public childcare, might be ideal. For example, Lefebvre and Merrigan(2008) finds that public policy offering generous childcare subsidies together withfree full-time kindergarten access has a substantial positive effect on the labour supply of mothers in Canada from 1993 to 2000. The importance of both providing
sufficient access and reducing the costs of childcare can be seen from countries suchas Sweden, the Netherlands and Norway. All three European countries provided
mothers with extended access to public childcare alongside high childcare subsidies
which resulted in high maternal employment rates. In those countries, further reduction in the price of childcare has led to only small or insignificant changes inmothers’ labour supply (Lundin et al. (2008) for Sweden; Bettendorf et al. (2012)39
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)for the Netherlands). This suggests the importance of public policy, especially in
low maternal employment countries. It is worthwhile to note that when subsidies
are provided regardless of whether one works, there will be a reduction in the labour
supply of mothers even in high maternal employment countries (Schone (2004) andNaz (2004) for Norway). This implies that it is important to provide subsidies thatare conditional on employment.
During the period of Japan’s reforms from 1995-2001, neither access to childcare
nor any institutional background changed. Therefore, the increase in PL income
replacement might have benefited only those mothers who are lucky to have childcare
facilities, nannies, or husbands to care for their children and who would have worked
anyway regardless of the amount of income replacement. Also, taking into accountthe substantial opportunity cost of childbearing and childrearing,29 the magnitudeof the increase in income replacement as a result of the 1995 and 2001 reforms might
be too small to impact the job continuity of mothers.30
29

Kato et al. (2013) found that childbearing will result in a considerable wage loss as well as

substantial reduction in promotion odds in Japan. Only 24.5% of workplaces consider leave periods
as worked period, and PL periods are not included in the calculation for seasonal salary increases.
Severance pay is also affected; 36.3% of workplaces indicate that employees who take leave receive
reduced severance compensation (MHLW (2007)). Also, childcare-related absenteeism reduces thepromotion probability and wages of mothers.
30

Yamaguchi (2013) evaluated an ex-ante policy of an increase in income replacement from 50%

to 100% and estimated a small increase in job continuity.

40
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

9. Conclusion
This study assesses the impact of changes in the PL income replacement rate on
mothers’ job continuity surrounding childbirth. My focus is on Japan, where therate of maternal employment is very low, but the PL program is relatively generous.
Japanese job-protected PL allows mothers to stay at home until the child reaches
the age of exactly one year old, and guarantees mothers’ right to return to work totheir previous employer. The Japanese government twice increased the PL income
replacement rate substantially first in 1995, from 0% to 25%, and then in 2001, from
25% to 40%. Before and after the reforms, the maximum duration for job protection and eligibility for benefits were unchanged. Under the PL program, employed
mothers receive income replacement only if they promise to return to work at theirprevious employers after childbirth. The income replacement is determined in accordance with a mother’s average monthly wage in the months prior to childbirth, andis capped. The maximum cap is high enough to provide the income replacement proportional to monthly wages for most mothers. I identified the causal effects of thesereforms by comparing the job continuity of regularly employed women who gavebirth to their first child before and after each reform. The treatment and control
groups are randomly assigned according to the birth date of their first child, whichbiologically cannot be perfectly controlled. Because the government implemented
the reforms shortly after the policy was amended, the new mothers were unable toanticipate the reform and control the timing of their conception and childbirth to

41
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

qualify for the reform. Therefore, the framework of this study is a quasi experiment.
The outcome variable was job continuity surrounding childbirth, which takes avalue of 1 if the mother remains employed with the same employer, and 0 otherwise. I investigated the outcome from two years before childbirth to one year afterchildbirth. In this way, I was able to capture those mothers who remained employed
before as well as after their PL expires (i.e. one year after the birth). My results suggest that the probability of continuing regular employment surrounding childbirth
is not significantly different between the treatment mothers and those who did not
qualify for the reform. The results do not change even after controlling for the effectof macroeconomic shocks by a difference-in-difference estimate with fathers or nonchildbearing women as the comparison group. The results from placebo regression
also confirm that there are no pre-existing trends to harm the comparison. I alsofind no significant effects when I run regression by education levels or by motherswith a second child.
Japan’s PL reforms increased mothers’ marginal wages only in the childbirth
year; however, as discussed in the previous section, Japanese mothers face considerable hardships with childrearing when they return to work. There is a severe supply
shortage of childcare, with long waiting lists in all regions of the country; thus, most
expectant mothers find it infeasible to remain employed after childbirth. The lackof alternative childcare, such as nannies, and lack of help from their own husbands
are also issues that compound Japanese mothers’ hardship. Taking all this into
account, it is understandable that the two reforms have not had an impact on the42
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

job continuity of mothers. In the current Japanese labour market, the only mothers
who can stay employed are those lucky to find someone to care for their child (e.g.
a childcare facility, husband, or nanny). The government has spent an enormous
amount of money on the reforms, but they are not cost-effective. The Japanesereforms are a good example of why family policies for new mothers do not promote
job continuity if they are not accompanied by a simultaneous expansion of access topublic, private, and alternative childcare for mothers.

References
Ai, C., Norton, E., 2003. Interaction terms in logit and probit models. Economics
Letters 80 (1), 123–129.
Angrist, J., Pischke, J., 2008. Mostly Harmless Econometrics: An Empiricist’s Companion. Princeton University Press.
Azmat, G., Gonzalez, L., 2010. Targeting fertility and female participation throughthe income tax. Labour Economics 17 (3), 487–502.
Baker, M., Milligan, K., 2008. How does job-protected maternity leave affect mothers’ employment? Journal of Labor Economics 26 (4), 655–691.
Baum, C. L., 2003. The effect of state maternity leave legislation and the 1993 family
and medical leave act on employment and wages. Labour Economics 10 (5), 573–
596.

43
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

Berlinski, S., Galiani, S., 2007. The effect of a large expansion of pre-primary school
facilities on preschool attendance and maternal employment. Labour Economics
14 (3), 665–680.
Bertrand, M., Duflo, E., Mullainathan, S., 2004. How much should we trust
differences-in-differences estimates? The Quarterly Journal of Economics 119 (1),249–275.
Bettendorf, L., Jongen, E., Muller, P., 2012. Childcare subsidies and labour supply:
evidence from a large dutch reform. CPB Discussion Paper (217).
Blundell, R., Macurdy, T., 1999. Chapter 27 labor supply: A review of alternative
approaches. Vol. 3, Part A of Handbook of Labor Economics Edited by Ashenfelter, O. and Card, D. Elsevier, pp. 1559–1695.
Boeri, T., van Ours, J., 2013. The Economics of Imperfect Labor Markets. Princeton
University Press.
Conley, T. G., Taber, C. R., 2011. Inference with difference in differences with asmall number of policy changes. The Review of Economics and Statistics 93 (1),
113–125.
Donald, S. G., Lang, K., 2007. Inference with difference-in-differences and otherpanel data. The Review of Economics and Statistics 89 (2), 221–233.
Eissa, N., Liebman, J. B., 1996. Labor supply response to the earned income tax
credit. The Quarterly Journal of Economics 111 (2), 605–37.
44
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)Francesconi, M., van der Klaauw, W., 2007. The socioeconomic consequences of”in-work” benefit reform for british lone mothers. Journal of Human Resources
42 (1), 1–31.
GEBCO, 2007. White Paper on Gender Equality 2007. Gender Equality Bureau
Cabinet Office(GEBCO).
Gelbach, J. B., 2002. Public schooling for young children and maternal labor supply.
The American Economic Review 92 (1), 307–322.
Gruber, J., 1994. The incidence of mandated maternity benefits. American Economic
Review 84 (3), 622–41.
Hanratty, M., Trzcinski, E., 2009. Who benefits from paid family leave? impact of
expansions in canadian paid family leave on maternal employment and transfer
income. Journal of Population Economics 22, 693–711.
Jukic, A., Baird, D., Weinberg, C., McConnaughey, D., Wilcox, A., 2013. Length ofhuman pregnancy and contributors to its natural variation. Human Reproduction
28 (10), 2848–2855.
Kato, T., Kawaguchi, D., Owan, H., 2013. Dynamics of the gender gap in theworkplace: An econometric case study of a large japanese firm. Paper presented
at the NBER Japan Project Meeting, Tokyo, July 26-27.
Klerman, A., Leibowitz, A., 1997. Labor supply effects of state maternity leave

45
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)legislation. In: Gender and Family Issues in the Workplace Edited by Blau, F.
and Ehrenberg, R. Russell Sage Foundation, Ch. 3, pp. 65–85.
Lalive, R., Schlosser, A., Steinhauer, A., Josef, Z., 2013. Parental leave and mothers’
careers: The relative importance of job protection and cash benefits. Review of
Economic Studies 93 (1), 113–125.
Lalive, R., Zweimuller, J., 2009. How does parental leave affect fertility and return to work? evidence from two natural experiments. The Quarterly Journal of
Economics 124 (3), 1363–1402.
Lefebvre, P., Merrigan, P., 2008. Childcare policy and the labor supply of mothers with young children: A natural experiment from canada. Journal of Labor
Economics 26 (3), 519–548.
Lundin, D., Mork, E., Ockert, B., 2008. How far can reduced childcare prices pushfemale labour supply? Labour Economics 15 (4), 647–659.
Meghir, C., Phillips, D., 2010. Chapter 3 labour supply and taxes. Dimensions of
Tax Design: the Mirrlees Review Edited by Institute for Fiscal Studies. Oxford
University Press, pp. 202–274.
Meyer, B., Rosenbaum, D., 2001. Welfare, the earned income tax credit, and thelabor supply of single mothers. Quarterly Journal of Economics 116 (3), 1063–
1114.

46
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

MHLW, 2002. Basic Survey of Gender Equality in Employment Management. The
Ministry of Health, Labour and Welfare(MHLW).
MHLW, 2007. Basic Survey of Gender Equality in Employment Management. The
Ministry of Health, Labour and Welfare(MHLW).
Moulton, B., 1990. An illustration of a pitfall in estimating the effects of aggregate
variables on micro units. The Review of Economics and Statistics 72 (2), 334–338.
Naz, G., 2004. The impact of cash-benefit reform on parents’ labour force participation. Journal of Population Economics 17 (2), 369–383.
Nollenberger, N., Rodriguez-Planas, N., 2011. Child care, maternal employment andpersistence: A natural experiment from spain. IZA Discussion Paper (5888).
Ruhm, C., 1998. The economic consequences of parental leave mandates: Lessons
from europe. The Quarterly Journal of Economics 113 (1), 285–317.
Sanchez-Mangas, R., Sanchez-Marcos, V., 2008. Balancing family and work: The
effect of cash benefits for working mothers. Labour Economics 15 (6), 1127–1142.
Schonberg, U., Ludsteck, J., 2007. Maternity leave legislation, female labor supply,
and the family wage gap. IZA Discussion Papers 2699.
Schone, P., 2004. Labour supply effects of a cash-for-care subsidy. Journal of Population Economics 17, 703–727.

47
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

Waldfogel, J., Higuchi, Y., Abe, M., 1999. Family leave policies and women’s retention after childbirth: Evidence from the united states, britain, and japan. Journalof Population Economics 12 (4), 523–545.
Wooldridge, J., 2010. Econometric Analysis of Cross Section and Panel Data. The
MIT Press.
Yamaguchi, S., 2013. Life-cycle effect of parental leave policy on female labor market
outcomes. McMaster University.

APPENDIX

48
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)(1) Mothers - 2001 Reform(2) Fathers - 2001 Reform
100%

100%
90%

Control
Treatment

80%

90%
80%

70%

70%

60%

60%

50%

50%

40%

40%

30%

30%

Control
Treatment

20%

20%

2 years before

1 year before

Birth year

2 years before

1 year after

1 year before

Birth year

1 year after(3) Non-Mothers - 2001 Reform
100%
90%

80%
70%

Control
Treatment

60%
50%

40%
30%
20%

2 years before

1 year before

Birth year

1 year after

Figure 4: Job Continuity around the Time of Giving Birth for the Treatment and Control Groups:
the 2001 Reform

Data are from the ESS 2002. Rates are calculated for mothers and fathers who were employed as
regular employees three years before the childbirth, and for non-mothers with similar characteristics
as mothers. The treatment group comprises mothers who gave birth and fathers who had a newborn
child between October 2000 and September 2001; the control group comprises mothers who gavebirth and fathers who had a newborn child between October 1999 and September 2000. Means areweighted with the sampling weights.

49
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

2001 Reform
Treatment
vs.
Control
2 years before birth
1 year before birth
Birth year
1 year after birth
Covariates
Sample size

1995 Reform

Treatment
vs.
Second Control

Treatment
vs.
Control

0.00870.00920.00710.0083-0.0038-0.0009(0.0173)(0.0171)(0.0169)(0.0167)(0.0178)(0.0176)

0.01670.01950.03870.0418 *-0.0023-0.0012(0.0247)(0.0237)(0.0243)(0.0235)(0.0216)(0.0209)

0.00150.0070-0.0057-0.0030-0.0129-0.0165(0.0238)(0.0212)(0.0237)(0.0216)(0.0176)(0.0156)-0.00200.0039-0.0164-0.0133

0.01910.0153(0.0232)(0.0205)(0.0232)(0.0209)(0.0171)(0.0149)

No

Yes

No

Yes

No

Yes

2691

2722

3443

Table 3: Difference Estimates

Note: The outcome variable is job continuity, which takes a value of 1 if the individual remains asa regular employee with pre-birth employer and 0 otherwise. Estimates are average marginal effectof Ref orm in model (2). The 2001 treatment group comprises mothers who gave birth between October 2000 and September 2001; the 2001 control group comprises mothers who gave birth between
October 1999 and September 2000; the second 2001 control group comprises mothers who gavebirth between October 1998 and September 1999; the 1995 treatment group comprises mothers who
gave birth between October 1995 and September 1996; the 1995 control group comprises those who
gave birth between October 1993 and September 1994. Robust standard errors are in parentheses.
Means are weighted with the sampling weights. ***p>0.01, **p>0.05, and *p>0.1.

50Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

2001 Reform
Treatment
vs.
Control
Fathers
2 years before birth
1 year before birth
Birth year
1 year after birth
Sample size

NonMothers

1995 Reform

Treatment
vs.
Second Control
Fathers

Treatment
vs.
Control

NonMothers

Fathers

NonMothers

0.00940.01030.00970.0172-0.00540.0024(0.0173)(0.0201)(0.0169)(0.0197)(0.0175)(0.0197)

0.01870.02690.0476

0.0436-0.0152

0.0232(0.0247)(0.0279)(0.0240)(0.0278)(0.0221)(0.0252)

0.00940.02870.00730.0180-0.0363-0.0088(0.0236)(0.0285)(0.0233)(0.0295)(0.0185)(0.0230)

0.00230.0147-0.00170.0329-0.0084-0.0208(0.0235)(0.0294)(0.0233)(0.0304)(0.0185)(0.0233)

6806

5382

6793

5444

8073

6886

Table 4: Difference in Difference Estimates

Note: Note: The outcome variable is job continuity, which takes a value of 1 if the individual
remains as a regular employee with pre-birth employer and 0 otherwise. Estimates are marginal
effects for the interaction term from the probit model (3), and include covariates. Robust standard
errors clustered by group are in parentheses. The critical values for 1%, 5% and 10% significancelevels are 9.92, 4.30 and 2.92 (t-distribution with 2 degrees of freedom). Means are weighted withthe sampling weights. ***p>0.01, **p>0.05, and *p>0.1.

51
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

2001 Reform

1995 Reform

Treatment
vs.
Control
Before
after
Birth
DD
-0.0055

Treatment
vs.
Second Control

Fathers
DDD

Nonmothers
DDD-0.0075-0.0058

Before
after
Birth
DD
-0.0217

Treatment
vs.
Control

Fathers
DDD

Nonmothers
DDD-0.0128-0.0271

Before
after
Birth
DD
0.0179Fathers
DDD

Nonmothers
DDD-0.0026

0.0359(0.0232) (0.0255) (0.0298)(0.0233) (0.0248) (0.0293)(0.0204) (0.0210) (0.0253)

2691

2722

3443

Sample size

6806

5382

6793

5444

8073

6886

Table 5: Before and After Childbirth Difference in Difference Estimates

Note: The outcome variable is job continuity, which takes a value of 1 if the individual remains asa regular employee with pre-birth employer and 0 otherwise. Estimates are marginal effects for theinteraction term from the probit model and include covariates. Robust standard errors clustered
by group are in parentheses. The critical values for 1%, 5% and 10% significance levels are 5.84,
3.18 and 2.35 (t-distribution with 3 degrees of freedom). Means are weighted with the samplingweights.***p>0.01, **p>0.05, and *p>0.1.

Policy amendement date:
29 June 1994

Policy enforcement date:
1 April 1995
Income replacement
during PL 0%

Income replacement
during PL 20%

Has 3-year-old child-1997 data

10 11 12 1

2

3

4

1993

5

Has 2-year-old child-1997 data

6

7

8

9 10 11 12 1

1994

Pregnancy
thresholdLump-sum PL income
replacement 0%

Mothers who gave birth during the period
Mothers who gave birth during the period

2

3

4

5

6

7

8

Has 1-year-old child-1997 data

9 10 11 12 1

1995

2

3

4

5

Has 0-year-old child-1997 data

6

7

8

9 10 11 12 1

2

3

4

1996

5

6

t
7

8

9 10 11 12 month

1997

Lump-sum PL income
replacement 5%(marked as black) qualify for ‘income replacement during PL’ reform; the starting date of PL is 1 April 1995, or later.
(marked as grey) qualify for ‘lump-sum PL income replacement’ reform; the starting date of PL is 1 April 1995, or later.

Figure A .1: Identification Strategy and the Data Structure of the 1995 Reform

Note: Data are from the ESS 1997. Based on the child’s age in the 1997 data, the date of childbirth(horizontal axis) is identified. The policy was amended in June 1994 and enacted in April 1995.

52
Institute of Social Science, University of Tokyo

year

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

2001 Reform
Oct.1998-Sep.1999
vs.
Oct.1997-Sep.1998

Difference

2 years before birth
1 year before birth
Birth year
1 year after birth

Fathers
DD

1995 Reform

Oct.1997-Sep.1998
vs.
Oct.1996-Sep.1997

NonFathers
Mothers DifferenceDD
DD

Oct.1993-Sep.1994
vs.
Oct.1992-Sep.1993

NonFathers
Mothers DifferenceDD
DD

Oct.1992-Sep.1993
vs.
Oct.1991-Sep.1992

NonFathers
Mothers Difference
DD
DD

NonMothersDD

0.050 ***

0.043

0.041

0.035 *

0.038

0.036

0.021

0.021

0.020

-0.005-0.002-0.024(0.018)(0.018)(0.021)(0.020)(0.020)(0.024)(0.018)(0.018)(0.022)(0.019)(0.019)(0.021)

0.018

0.012

0.023

0.109 *** 0.114 ** 0.099 *

0.010

0.017

0.003

0.005

0.010

-0.007(0.023)(0.024)(0.026)(0.022)(0.020)(0.021)(0.025)(0.021)(0.021)(0.025)(0.024)(0.028)0.045 **

0.044

0.044

0.020

0.023

0.020

0.022

0.027

0.028

-0.0010.010-0.035(0.020)(0.022)(0.027)(0.019)(0.021)(0.027)(0.015)(0.018)(0.023)(0.015)(0.018)(0.023)0.042 **

0.050

0.024

0.013

0.012

0.005

0.018

0.021

0.033

-0.007-0.001-0.028(0.019)(0.022)(0.028)(0.018)(0.021)(0.027)(0.014)(0.018)(0.024)(0.014)(0.017)(0.024)

Sample size 2788

6691

5576

2702

6341

5404

3408

7926

6816

3192

7486

6384

Table 6: Placebo Difference Estimates and Difference-in-Difference Estimates

Note: The outcome variable is job continuity, which takes a value of 1 if the individual remains asa regular employee with pre-birth employer and 0 otherwise. ’Difference’ columns: estimates areaverage marginal effect of Ref orm in model (2), and robust standard errors are in parentheses;’Fathers DD’ and ’Non-Mothers DD’ columns: estimates are marginal effects for the interaction
term from the probit model (3), and robust standard errors clustered by group are in parentheses.
All regressions include covariates. The critical values for 1%, 5% and 10% significance levels for the
DD models are 9.92, 4.30 and 2.92 (t-distribution with 2 degrees of freedom). Means are weighted
with the sampling weights.***p>0.01, **p>0.05, and *p>0.1.

53
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

2001 Reform

1995 Reform

First Child
University
andCollege
Graduates

High
SchoolGraduates

First Child
SecondChild

University
andCollege
Graduates

High
SchoolGraduates

SecondChild

Difference
Birth year
1 year after birth
Sample size

-0.01180.03080.00480.0068-0.0351 *-0.0459(0.0286)(0.0309)(0.0320)(0.0255)(0.0186)(0.0280)-0.00220.01180.00590.0365-0.0009-0.0171(0.0276)(0.0300)(0.0320)(0.0249)(0.0175)(0.0277)

1463

1228

1260

1535

1908

1391

Fathers DD
Birth year
1 year after birth
Sample size

0.00070.02150.0243-0.0075-0.0610-0.0550(0.0323)(0.0344)(0.0344)(0.0282)(0.0238)(0.0304)-0.00120.00770.02250.0203-0.0327-0.0329(0.0322)(0.0341)(0.0348)(0.0280)(0.0234)(0.0304)

3597

3209

4678

3755

4318

5149

Non-Mothers DD
Birth year
1 year after birth
Sample size

0.02270.03270.0321-0.0054-0.0135-0.0262(0.0385)(0.0408)(0.0425)(0.0352)(0.0296)(0.0378)0.01510.01350.0137-0.0157-0.0258-0.0299(0.0391)(0.0433)(0.0448)(0.0360)(0.0295)(0.0381)

2926

2456

2520

3070

3816

2782

Table 7: Estimates by Education Level and for Mothers Having Their Second Child

Note: The outcome variable is job continuity, which takes a value of 1 if the individual remains
as a regular employee with pre-birth employer and 0 otherwise. ’Difference’ rows: estimates areaverage marginal effect of Ref orm in model (2), and robust standard errors are in parentheses;’Fathers DD’ and ’Non-Mothers DD’ rows: estimates are marginal effects for the interaction termfrom the probit model (3), and robust standard errors clustered by group are in parentheses. All
regressions include covariates. The critical values for 1%, 5% and 10% significance levels for the
DD models are 9.92, 4.30 and 2.92 (t-distribution with 2 degrees of freedom). Means are weighted
with the sampling weights. ***p>0.01, **p>0.05, and *p>0.1.

54
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

Rate of income replacement

Policyamendment date
May 15, 1991

Policyenforcement date
April 1, 1992

June 29, 1994

April 1, 1995

20%

5%

25%

10 months

May 12, 2000

January 1, 2001

30%

10%

40%

10 months

December 8, 2004

April 1, 2005

30%

10%

40%

16 months

April 23, 2007

April 1, 2007

30%

20%

50%

16 months

March 30, 2009

April 1, 2010

50%

0%

50%

16 months

During PL Lump-sum Total
None
None
0%

Maximumlength10 months

Eligibility
work for companies with morethan 30 regular employees
Only regular employees
Only regular employees
Regular and non-regular
employees
Regular and non-regular
employees
Regular and non-regular
employees

Table A .1: List of the Parental Leave Reforms

Note: Before taking PL mothers can take ML, which is 42 days before and 56 days after the birthof the child. ’During PL’ is the rate of income replacement during the leave (monthly stipend),’lump-sum’ is paid six months after return to work, the amount is provided for the length of leave.

55
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)(1) Mothers - 1995 Reform(2) Fathers - 1995 Reform

100%

100%

90%

Control
Treatment

80%

90%
80%

70%

70%

60%

60%

50%

50%

40%

40%

30%

30%

20%

Control
Treatment

20%

2 years before

1 year before

Birth year

1 year after

2 years before

1 year before

Birth year

1 year after(3) Non-Mothers - 1995 Reform
100%

90%
80%
70%

Control
Treatment

60%

50%
40%
30%
20%

2 years before

1 year before

Birth year

1 year after

Figure A .2: Job Continuity around the Time of Giving Birth for the Treatment and Control
Groups: the 1995 Reform

Note: Data are from the ESS 1997. Rates are calculated for mothers and fathers who were
employed as regular employees three years before the childbirth, and for non-mothers with similar
characteristics as mothers. The treatment group comprises mothers who gave birth and fathers
who had a newborn child between October 1995 and September 1996; the control group comprises
mothers who gave birth and fathers who had a newborn child between October 1993 and September
1994. Means are weighted with the sampling weights.

56
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

2001 Reform
Treatment
vs.
ControlLPM
2 years before birth
1 year before birth
Birth year
1 year after birth
Covariates
Sample size

1995 Reform

Treatment
vs.
Second Control

Treatment
vs.
Control

0.00860.00970.00710.0084-0.0038-0.0019(0.0173)(0.0172)(0.0169)(0.0168)(0.0178)(0.0177)

0.01670.02070.03870.0432 *-0.0023-0.0024(0.0247)(0.0238)(0.0243)(0.0236)(0.0216)(0.0209)

0.00150.0075-0.0057-0.0034-0.0129-0.0154(0.0238)(0.0214)(0.0237)(0.0217)(0.0176)(0.0157)-0.00200.0041-0.0164-0.01400.01910.0163(0.0232)(0.0206)(0.0232)(0.0210)(0.0171)(0.0151)

No

Yes

No

Yes

No

Yes

2691

2722

3443

Table A .2: Difference Estimates (Linear Probability Model)

Note: The outcome variable is job continuity, which takes a value of 1 if the individual remains
as a regular employee with pre-birth employer and 0 otherwise. Estimates are coefficients from thelinear probability model. The 2001 treatment group comprises mothers who gave birth between October 2000 and September 2001; the 2001 control group comprises mothers who gave birth between
October 1999 and September 2000; the second 2001 control group comprises mothers who gavebirth between October 1998 and September 1999; the 1995 treatment group comprises mothers who
gave birth between October 1995 and September 1996; the 1995 control group comprises those who
gave birth between October 1993 and September 1994. Robust standard errors are in parentheses.
Means are weighted with the sampling weights. ***p>0.01, **p>0.05, and *p>0.1.

57
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)(1-1) University and College Graduates -2001 Reform
100%(1-2) High School Graduates -2001 Reform
100%

90%

90%

Control
Treatment

80%

Control
Treatment

80%

70%

70%

60%

60%

50%

50%

40%

40%

30%

30%

20%

20%

2 years before

1 year before

Birth year

1 year after

2 years before

1 year before

Birth year

1 year after(2) Second Child -2001 Reform(2) Fathers -1995

100%

90%

Control
Treatment

80%
70%
60%

50%
40%
30%

20%

2 years before

1 year before

Birth year

1 year after

Figure A .3: Job Continuity around the Time of Giving Birth for the Treatment and Control
Groups: the 2001 Reform- by Education Level (1), and Mothers Having Their Second Child (2)Note: Data are from the ESS 2002. (1-1) and (1-2): Rates are calculated for mothers who were
employed as regular employees three years before the childbirth by education level. (2): Rates arecalculated for mothers who having their second child and who were employed as regular employees
three years before the childbirth. Treatment group: mothers who gave birth between October2000 and September 2001; Control group: mothers who gave birth between October 1999 and
September 2000. Means are weighted with the sampling weights.

58
Institute of Social Science, University of Tokyo

Parental Leave Reforms and the Employment of New Mothers (Yukiko Asai)

2001 Reform
Control

Education University / College Graduates
High School Graduates
Pre-birth Characteristics (3 Years Before)
Tenure (years)
Company size Less than 30 employees
30-299 employees
More than 300 employees
Public office
Industry Manufacturing
Service
Sample size

Treatment

0.542
0.458

0.547
0.453

5.498
0.204
0.264
0.343
0.189
0.227
0.773
623

5.384
0.198
0.257
0.369
0.176
0.273
0.727
637

1995 Reform
Treatment

t
0.02
0.02

Control

0.427
0.573

0.479
0.521

0.19
0.05
0.04
0.53
0.22
1.84
1.84

4.372
0.270
0.257
0.306
0.167
0.263
0.737
741

4.608
0.275
0.218
0.317
0.189
0.256
0.744
650

t
2.49
2.49
1.02
0.04
2.08
0.11
0.82
0.05
0.05

Table A .3: Means of Key Characteristics of Mothers Having Their Second Child

Note: For the 2001 reform, the treatment group is mothers who gave birth between October 2000
and September 2001, and the control group is mothers who gave birth to their second child between
October 1999 and September 2000. For the 1995 reform, the treatment group is mothers who gavebirth between October 1995 and September 1996, and the control group is mothers who gave birth
to their second child between October 1993 and September 1994. t is the test of equality of means
between two groups. Means are weighted with the sampling weights.

59
Institute of Social Science, University of Tokyo