Parental leave reforms and the employment of new mothers: Quasi-experimental evidence from Japan

•I examine the effect of an increase in cash benefit on mothers’ job continuity•The cash benefit was first introduced in 1995 and the replacement rate was 25%•The replacement rate was raised from 25% to 40% in 2001•The job continuity of mothers who gave birth before and after the reform are compared•I find little evidence that job continuity increased in response to the reform

This study examines the changes in job continuity of new mothers following an increase in cash benefits provided during parental leave. The cash benefit was first introduced in 1995 and the replacement rate was 25%. The replacement rate was raised from 25% to 40% in 2001. During this period, the maximum duration of paid leave and that of job-protection remained unchanged, and therefore, I can isolate the effects of changes in the amount of cash benefit from those due to changes in duration of leave. By comparing the job continuity of women who gave birth to their child before the reform and those who did so after the reform, I find little evidence that the labour supply pattern of new mothers changed in response to the increased cash benefit.