Cecilia Machado, FGV/EPG

Sala 209

“Paid Leave Extensions, Informality and the Strategic Behavior of Firms and Workers”

Abstract: This paper studies the effects of a sizable paid maternity leave extension (from four to six months) on labor market outcomes of women in Brazil. Our empirical approach exploits the exact leave taking dates and the staggered implementation of the extended leave policy across firms, using detailed information on workers and firms in the formal labor market. Our results indicate that approximately 40% of eligible women take extended maternity leave, but employment effects are modest and temporarily dated during the leave extension. We find evidence of moral hazard in leave taking as some women take the paid leave extension and voluntarily quit their jobs when it ends. College educated and high wage women exhibit higher take up rates, reinforcing the regressive properties of a paid leave that cannot be accessed by women in informal labor contracts.