Microenterprises are an important source of employment, particularly in low-income countries where they employ more than half of the labor force. While access to finance has often been viewed as a powerful tool for small-scale business development, a growing literature has shown that success is not guaranteed and may depend critically on the entrepreneur’s gender. Experimental studies have consistently demonstrated that female-owned microenterprises earn lower returns to capital than male-owned enterprises. This project investigated one potential explanation for this gap: limited access to childcare services.
To the extent that family responsibilities constrained women’s businesses, providing subsidized access to quality childcare services was expected to increase women’s labor supply, improve business productivity, and enhance the effectiveness of standard development interventions such as microcredit and business grants. This project adopted an innovative approach to studying microenterprise development by explicitly integrating domestic constraints into the analysis and by combining a business support intervention with a family support intervention. The study addressed three main research questions: whether access to childcare services for children aged three to five (i) increased women’s labor supply and stimulated the development of female-owned businesses, (ii) improved the effectiveness of mainstream business development interventions such as business grants, and (iii) improved children’s developmental outcomes.
To answer these questions, the research team collaborated with BRAC in Uganda to implement a randomized controlled trial. Women were randomly assigned to one of four groups: (T1) subsidized access to childcare services for children aged three to five (family support intervention), (T2) a business grant (business support intervention), (T3) both childcare access and a business grant to assess complementarities, or (C) a control group. The study tracked 1,496 households across 400 communities in southern Uganda over a three-year period, collecting detailed data on women’s and household members’ labor market outcomes, socio-economic status, child development, and schooling.
The experimental design enabled the identification of the causal effects of childcare access on women’s labor supply and on returns to capital in female-owned microenterprises. The effect of childcare was identified by comparing outcomes for women assigned to T1 and T3 with those assigned to C and T2. The effect of business grants was identified by comparing outcomes for women assigned to T2 and T3 with those assigned to C and T1. Complementarities between childcare support and capital were identified by comparing outcomes for women in T3 with those in T1 and T2. Evidence of complementarities was assessed by testing whether the effect of T3 exceeded the sum of the individual effects of T1 and T2.
The completed project contributed to the literature by providing causal evidence on the impact of childcare services on female labor supply in a low-income setting and by identifying complementarities between access to childcare and capital in unlocking women’s economic potential. While substantial evidence from high-income countries has documented the importance of childcare for women’s labor market outcomes, rigorous evidence from developing countries has remained limited. To the best of our knowledge, this study was among the first to experimentally estimate complementarities between childcare access and capital in female entrepreneurship.
The research also contributed to the second theme of the G2LM|LIC program by generating new causal evidence on the link between women’s caregiving responsibilities and their labor market productivity. In contexts where social norms place primary caregiving responsibilities on women, the lack of childcare services can significantly constrain economic opportunities. The evidence generated by this project provides important insights into the sources of gender disparities in labor markets in Sub-Saharan Africa and offers policy-relevant guidance for interventions aimed at supporting women’s economic participation.