employment among the women who do enter shifts significantly towards smaller firms with an up to 41 percentage points increase in the probability of joining a smaller firm and an equivalent decrease in the probability of joining a larger firm. To confirm that these results are indeed driven by women who give birth, panels (c) and (d) of Appendix Figure A1 show the underlying evolution of new employment probabilities. Panel (b) of Figure 2 shows heterogeneity patterns in transitions into formal employment. It suggests that when expectant mothers find a formal job, it is disproportionately in smaller, domestic, and lower-productivity firms. The results on transitions into formal employment suggest that in response to the incentives generated by maternity benefits smaller, domestic, and less-productive firms formalize some of their previously informal employees.

# **4.4 Post-Childbirth Labor Market Outcomes**

We also examine whether pre-childbirth wage increases are associated with higher wages postchildbirth. As the majority of women return to work three years after giving birth (they receive two years of maternity benefits and one year of child care allowance or three years of child care allowance), and because we only have four years of follow-up data for 2012 and 2013 births, we focus on births in these two years and the period 37 to 48 months after childbirth, re-estimating equation (1) with these post-childbirth months included.<sup>11</sup> Panel (a) of Figure 3 shows the evolution of the earnings of women who give birth relative to the control group, separately for women who work in smaller and larger firms. It suggests that after returning from maternity leave, both groups of women earn less than women who do not give birth, which can be interpreted as a child penalty. The earnings decrease is 7.5% in smaller firms and 14.2% in larger firms. Although legal employment protections apply to all firms regardless of size, a bigger earnings decrease in larger firms could be consistent with different working conditions, less flexibility, more discrimination, or a more affluent workforce that can afford to work less.

In panel (b) of Figure 3, we consider separately women in small firms who experienced large pre-birth earnings increases. On average, unlike women in large firms and women in small firms who do not get a large earnings increase, they appear to experience a smaller child penalty relative to their pre-pregnancy earnings. This suggests some persistence of the reported earnings increase during pregnancy. Figure A10 shows that this finding is robust to considering top five percentile wage increases as “large,” instead of top one percentile wage increases. Panels (c) and (d) of Figure 3 suggest that post-childbirth employment was similar among women working in smaller and larger firms, including those women who experienced large wage increases.

Panel (e) of Figure 3, Appendix Figure A11, and Appendix Table A1 provide suggestive evidence on the mechanism behind the divergence between women who experienced a reported earnings increase during pregnancy and others. One year before giving birth, 46% of women who would experience a large wage increase report earning either the monthly minimum wage

> 11Note that we consider only 24 months pre-birth period instead of 30 months to increase the estimation sample size.

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