Breaking Barriers or Reinforcing Inequalities: Affordable Childcare and Entrepreneurship

This study examines how childcare affordability affects entrepreneurial entry by leveraging Sweden’s 2002 “maxtaxa” reform, which standardized and capped childcare fees across municipalities. Using comprehensive Swedish administrative data, we find that reduced childcare costs significantly increase entrepreneurial entry rates, particularly among highly educated individuals and those with prior entrepreneurial experience. Notably, the effect is weaker for female entrepreneurs in Sweden, supporting the “Plan B” framework that women are less likely to pursue entrepreneurship as a fallback strategy in contexts with robust work-family policies. These findings have important implications for policymakers, highlighting the potential of family-oriented policies to stimulate entrepreneurial activity and how such policies can unlock the entrepreneurial potential of individuals with high human capital.