How Does Fertility Relaxation Policy Affect the Motherhood Wage Penalty

This paper examines the effect of fertility relaxation on the motherhood wage penalty, utilizing the China’s two-child policy as quasi-experiment. Our findings reveal heterogeneity in the policy’s effect. For one-child mothers, the policy change signals employers to update their beliefs about potential for future fertility, leading to a significant 9% increase in the wage penalty for them post-policy, compared to the non-mothers. Conversely, mothers who previously violated the policy by having a second child experienced an 8% decrease in their wage penalty as their illegal status was lifted post-policy. These outcomes are primarily attributable to changes in job discrimination rather than shifts in human capital. A further mechanism analysis suggests that the increase in the anticipatory wage penalty for one-child mothers is driven by statistical discrimination, whereas the decrease for two-child mothers is linked to taste-based discrimination post-policy.