The Effect of Family-Friendly Policies on Fertility and Maternal Labor Supply

Abstract

Low fertility is a major policy focus in Japan. Many policies, such as an increase in replacement allowances during parental leave, were rolled out during the 1990s and early 2000s with little evidence that they had any effect on fertility or labor supply. This study assesses the impact of policies designed to promote a family-friendly work culture on childbirth and labor supply from the mid-2000s on. The causal effects are identified by investigating two reform policies targeted at two different sizes of firms. The paper contributes to the literature on laws that impact organizational culture in a society where both gender and organizational norms are strong. The short-hour option in Japan significantly increased childbirth among working women who had been childless. The intent to give birth also increased among childless women at the treated firms, and there was an increased likelihood of women taking up permanent employment at reduced hours following their first childbirth. The policy effect was not significant for second or third births.