Breaking Barriers or Reinforcing Inequalities? The Impact of Affordable Childcare on Entrepreneurship

We exploit exogenous variation in the pricing of childcare caused by a nationwide reform to estimate the impact of lower childcare costs and the propensity of individuals to start a firm. The reform capped the childcare prices, whereas the exogenous variation in the reduction of childcare prices comes from the pre-reform prices, which depended on the place of residence and family type. Decreasing the cost of childcare lowers both the capital and time constraint, which can lead to individuals becoming entrepreneurs.

We evaluate such potential mechanisms both for males and females separately in a difference-in-difference setting up to 5 years post reform. We find that reducing childcare costs increases entrepreneurial activity for both mothers and fathers.

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