Abstract

Since the mid-1990s, there has been a steady decrease in the labor force participation of married women with children under the age of six. There is little empirical evidence that changes in demographics are responsible for the falling participation rates. Rather, it appears that this trend is concentrated amongst women with children under the age of two and that federal maternity leave mandates are most responsible. I estimate the effect of the Family and Medical Leave Act (FMLA) on participation by using the FMLA as a natural experiment and exploiting state-level differentiation in maternity leave statutes. Theoretically, maternity leave statutes intend to preserve job tenure for expecting mothers. However, if an employed mother on maternity leave learns that her value for staying at home exceeds her value from working, she will exit the labor force once the leave expires. Difference-in-differences estimates show that after the FMLA, employed and expecting married mothers who live in an area without state-mandated maternity leave are 2.7 percentage points more likely to leave the labor force after taking maternity leave than those who live in an area with state-mandated maternity leave. As a sensitivity test, I evaluate married women without infant children and single women as additional control groups to estimate difference-in-difference-in-differences effects of the FMLA. Altogether, the increase in the proportion of mothers leaving the labor force due to federally-mandated maternity leave accounts for almost two-thirds of the overall fall in labor force participation.