Study: Fertility Policy and Female Entrepreneurship: Evidence from the One-Child Policy in China (DOI: 10.2139/ssrn.5130582)
China's historical one-child policy, aimed at curbing population growth, had an unintended economic impact: it significantly increased female entrepreneurship, according to a new University of Michigan study.
The research suggests that stricter enforcement of fertility restrictions led to a surge in the number of women launching businesses. While prior work has documented a link between reduced fertility and women joining the labor force, the U-M study contributes to the literature by highlighting a surprising economic side effect of one of the world's most controversial population policies.
Using data from the China Health and Nutrition Survey and the Chinese business registry, the study found that female entrepreneurship rose by 3.8 percentage points-a 40.9% increase relative to the average rate of 9.3%-after provinces introduced harsher financial penalties for having additional children. Female entrepreneurship increased particularly among women of childbearing age (20-40 years), those with children and urban residents.
"The results show that when fertility fines restricted family size, many women redirected their time and effort into entrepreneurship," said co-author Jagadeesh Sivadasan, professor of business economics and public policy at U-M's Ross School of Business.
According to the study, each additional child increased child care demands on women by an average of 9.17 hours per week, while housework responsibilities increased by 4.36 hours per week. The effect was far more pronounced for women than for men, reinforcing the idea that family responsibilities disproportionately constrained women's career choices.
By limiting the number of children per family, the one-child policy, or OCP, effectively freed up time for women, allowing them to reenter the labor force, seek career advancements, or start businesses. The results suggest that time saved from having fewer children was a major driver of female entrepreneurship.
Additionally, the study found no evidence to support the concerns that women may be "reluctant entrepreneurs" forced to launch businesses due to a lack of employment opportunities, or that entrepreneurship serves as a temporary transition to outside employment.
Instead, the findings suggest that women who transitioned to self-employment experienced higher individual and household income and expenditure levels than transitions to outside employment. This suggests that businesses launched by women were financially viable rather than a fallback option.
Moreover, the study found that the quality of OCP-induced female-owned businesses was no different from other startups. Women who entered entrepreneurship following fertility restrictions were just as likely to incorporate their businesses, a sign of high-quality businesses. Importantly, the survival rate of these firms was comparable to other women-owned businesses, reinforcing the idea that these were not low-quality or short-lived ventures but rather legitimate, sustainable enterprises.
"The findings suggest that, unlike in some other developing country contexts, female entrepreneurship induced by fertility fines in China did not serve as a second-best alternative to outside employment, but instead provided a financially viable option for women," Sivadasan said.
The research also found that the effect was most pronounced in urban areas, where the OCP was more strictly enforced, and among educated females, who possibly saw entrepreneurship as a strategic career shift. Rural women, who were often allowed to have a second child if their first was a girl, did not experience the same boost in entrepreneurship.
The study adds to ongoing debates about how fertility policies influence labor markets and economic growth. While the OCP was officially abolished in 2015, its long-term economic effects are still being studied.
"This research highlights an important but overlooked consequence of restrictive fertility policies," Sivadasan said. "As countries around the world grapple with demographic shifts, the potential positive impact on female entrepreneurship and labor force participation could help to mitigate the economic challenges posed by declining fertility."
However, the authors caution that their study does not assess the overall impact of the one-child policy, but rather identifies one economic benefit of the policy. As China now struggles with low birth rates and a shrinking workforce, the unintended consequences of the OCP-including its role in shaping female entrepreneurship-may offer lessons for policymakers worldwide.
