The long-run impacts of parental leave policies on the motherhood penalty: Evidence from Canada

Motherhood affects the earnings of women. But does the type of maternity and parental leave available at the time of first birth matter? This paper addresses this question for lower- to middle-income mothers, using Canadian tax data for the years 1997–2019 and exploiting the 2006 introduction of the Québec Parental Insurance Plan, which offered a more generous leave benefit. Using an event-study difference-in-differences approach, this paper finds no significant short-term effect on initial earnings losses. However, mothers exposed to the reform experience a larger recovery, starting from four years after the birth of their first child, which is largely driven by stronger labour market attachment.