When maternity leave backfires: gender-biased leave, informality, and female labour supply – evidence from Vietnam

Evidence on how extending paid parental leave affects women’s labour-market outcomes, drawn largely from developed countries, is mixed. It offers little guidance for the developing world, where labour markets are largely informal and parental leave is gender-biased – mandating a long maternal absence around childbirth while providing little or no paternity leave. This paper fills that gap by developing the first general-equilibrium model of paid leave for economies with a large informal sector and a gender-biased leave system. The model predicts that a longer mandated leave raises the expected career interruption borne by women and widens gender gaps in labour-market returns; this reduces women’s labour supply. We test the prediction using Vietnam’s 2013 extension of maternity leave from four to six months, applying a regression-discontinuity design around the birth-date eligibility cutoff to three waves of the Vietnam Household Living Standards Survey (2016–2020). Intent-to-treat estimates show that mothers giving birth after the reform are 3–6 percentage points less likely to work and, conditional on working, supply 1–2 fewer days per month and 20–35 fewer minutes per day while their children are of childcare age; the effects attenuate but persist into school age. By examining the extensive as well as the intensive margin – an outcome prior developing-country studies overlook – the paper reconciles conflicting earlier findings and shows that a policy meant to support working mothers can instead reduce their labour supply where informality is widespread and leave entitlements fall mainly on women.