Unveiling hidden impacts: heterogeneous effects of extended parental leave on mothers’ labour outcomes*

This paper examines the impact of extended parental leave benefits in Canada on mothers’ earnings following childbirth. We exploit a sharp policy cut-off and implement a regression discontinuity design combined with a difference-in-differences approach (RD-DD), comparing mothers who gave birth shortly before and after the reform. We find that the extension of cash benefits leads to a reduction in mothers’ earnings in the short run, reflecting delayed returns to work. In contrast, medium- and long-run effects on average earnings are small and statistically insignificant. These null mean effects, however, conceal substantial heterogeneity. Quantile regression estimates show that extending cash benefits without extending job protection generates sizable earnings losses among high-earning mothers, whereas extending job protection substantially mitigates these losses and yields positive effects for middle-earning mothers. Overall, our findings highlight the importance of job protection in parental leave design, suggesting that it helps high-earning mothers maintain career continuity while providing greater stability for middle earners.