Parental Leave and Female Employment in Korea

It is often argued that the parental leave should be extended in order to help employees achieve the balance of work and family life. However, one should be careful in designing the parental leave since there is a tradeoff between the continuity of employment after childbearing and the depreciation of human capital due to the time off the work. The paper investigates whether the parental leave payment introduced in Korea in 2001 and expanded over the subsequent decade helped women's take-up of the leave and employment after giving birth. The results are as follows. First, the increase in the payment indeed raised the female take-up of the leave. Second, women returned to labor market less often after giving birth in the short run, but the size of the effect tends to diminish in the long run. However, the negative effect on returning to the same workplace after the birth remains significant in the long run. Lastly, the share of women of childbearing age at workplace increased in large-sized firms due to the increase in the parental leave payment, whereas it decreased in small and medium-sized firms. These findings suggest that the government should engineer the parental leave scheme so that female workers have an incentive to return to work earlier and that small and medium-sized firms have an incentive to adopt the policy.