Does maternity leave reform impact on the labour supply of the elderly? Evidence from a natural experiment in Vietnam

The aging population has been rising rapidly in every country, slowing the labour force and causing lower per capita growth. Many policies incentivize working in old age as it can alleviate the challenges of the aging population. This study examines the impacts of the extended maternity leave reform in Vietnam on elderly labour market outcomes. As grandparents' childcare responsibility may be reduced by maternal childcare following the extended maternal leave, especially for elderly living with children smaller than 1 year old, the reform gives older adults or grandparents more flexibility to join the labour market. Using the difference‐in‐differences model, we find that older people in the treatment group are more likely to return to the labour market following the reform implementation. The effect is positive and most robust for the self‐employment group rather than waged employment and for males rather than females. Our study suggests that there is a need for a policy design to shift public finance into the healthcare and pension system.