Microenterprises are an important source of employment, and developing such enterprises is a key policy concern in most countries, especially in low-income countries where they employ more than half of the labor force. While there is optimism about the power of finance for small-scale business development, a growing literature shows that success cannot be taken for granted and may critically depend on the entrepreneur’s gender. Experimental studies have demonstrated that microenterprises with a female owner have lower returns to capital, compared to enterprises with a male business-owner. The project studies one potential explanation behind this effect: lack of access to childcare services.
To the extent that familial obligations constrain women’s businesses, providing them with subsidized access to quality childcare services may increase their labor supply, improve the productivity of their businesses and improve the effectiveness of mainstream development interventions targeting them, such as microcredit. The research team proposes an innovative way to study microenterprise development, by fully integrating domestic constraints in the study of business development and by combining a direct business support intervention with a family support intervention. The goal of this study is to answer 3 key research questions: Can providing access to childcare services for three to five years old children (i) increase labor supply and stimulate the development of female businesses; (ii) improve the effectiveness of mainstream business development interventions, such as business grants; (iii) improve children’s development?
In order to answer these research questions, the team is collaborating with BRAC in Uganda to conduct a randomized experiment that will provide randomly selected women with: (T1) subsidized access to childcare for children aged 3-5 years old (the family support intervention) (T2) a business grant (the business support intervention) (T3) childcare and a business grant together (to understand complementarities). A fourth group (C) will be kept as control. They plan to track the targeted households over 3 years, collecting information on women’s and their household members’ labor market outcomes, socio-economic status, child development and schooling. Our study sample includes 1,496 households, spread across 400 communities in southern Uganda.
The design of the field experiment enables us to identify the causal effect of providing access to childcare for 3-5-year-old children on women’s labor supply and on the returns to capital in female-owned microenterprises. Given the randomized nature of the design, they can establish a causal relationship between the outcome of interest and the treatment conditions. The research team will identify the effect of childcare by comparing outcomes from women assigned to the treatment groups T1 and T3 to those assigned to treatment groups C and T2. They will identify the effect of a business grant by comparing outcomes for women assigned to T2 and T3 to those assigned to C and T1. Finally, they will identify the complementarities between childcare support and a business grant by comparing outcomes for women in T3 to those in T1 plus T2. In particular, if there is such a complementarity, they should observe that the effect of T3 is strictly greater than the sum of the effects of T1 and T2.
The project will contribute to the literature by estimating the causal effect of childcare services on female labor supply and identifying any complementarities between access to childcare and capital in unleashing women’s potential on the labor market. While there is ample evidence from developed countries on the importance of childcare services in unleashing women’s potential on the labor market, evidence from developing countries is cant and, to the best of our knowledge, no study has estimated the potential complementarities between access to childcare and capital.
The research is connected to the second theme of the G2LM/LIC program. As described in the call, women’s labor market outcomes and their fertility are likely to be closely connected. Especially in developing countries, social norms dictate that women are the primary caregivers of young children. Yet, causal evidence from developing countries on the link between women’s childrearing duties and their productivity on the labor market is scant. Our project aims to contribute to this evidence gap. The evidence generated will provide a key first step towards our understanding of some of the most likely causes of gender disparities in the labor markets in Sub-Saharan Africa.