Ann Arbor Times

China's one-child policy, implemented to control population growth, has had an unexpected economic impact by significantly increasing female entrepreneurship. This finding comes from a study conducted by the University of Michigan.

The research highlights that stricter enforcement of fertility restrictions led to more women starting businesses. While previous studies have shown a link between reduced fertility and increased female participation in the labor force, this study reveals an additional economic effect of China's controversial population policy.

Data from the China Health and Nutrition Survey and the Chinese business registry indicate that female entrepreneurship rose by 3.8 percentage points after provinces imposed harsher financial penalties for having more children. The increase was particularly notable among women aged 20-40, those with children, and urban residents.

Co-author Jagadeesh Sivadasan from U-M’s Ross School of Business stated, “The results show that when fertility fines restricted family size, many women redirected their time and effort into entrepreneurship.”

The study found that each additional child added an average of 9.17 hours per week in childcare demands on women and increased housework responsibilities by 4.36 hours per week. This disproportionately affected women's career choices compared to men.

By limiting family size, the one-child policy freed up time for women to reenter the workforce or start businesses. The findings suggest that time saved from having fewer children was a significant factor driving female entrepreneurship.

Contrary to concerns about "reluctant entrepreneurs," the study found no evidence suggesting women were forced into entrepreneurship due to lack of employment opportunities or used it as a temporary transition to other jobs. Women who transitioned to self-employment experienced higher income levels than those moving into outside employment.

Furthermore, OCP-induced female-owned businesses were comparable in quality to other startups. Women who started businesses following fertility restrictions were just as likely to incorporate them, indicating high-quality ventures with survival rates similar to other women-owned enterprises.

Sivadasan noted, “Unlike in some other developing country contexts, female entrepreneurship induced by fertility fines in China did not serve as a second-best alternative but provided a financially viable option for women.”

The effect was most pronounced in urban areas where the OCP was strictly enforced and among educated females who viewed entrepreneurship as a strategic career move. Rural women did not experience the same boost due to different policy applications allowing more flexibility if their first child was a girl.

This research contributes to debates on how fertility policies affect labor markets and economic growth. Although officially abolished in 2015, the long-term effects of the OCP are still under examination.

“This research highlights an important but overlooked consequence of restrictive fertility policies,” Sivadasan said. He emphasized its potential positive impact on female entrepreneurship could help address economic challenges posed by declining birth rates globally.

However, researchers caution that their study does not evaluate the overall impact of China's one-child policy but identifies one economic benefit related specifically to fostering female entrepreneurship amid current demographic shifts worldwide.