Childcare Matters: Female Business Owners and the Baby-Profit Gap

The previous literature documents that female-owned businesses are less profitable than male-owned businesses, including microenterprises that make up the majority of firms in developing countries. In this paper, we uncover an overlooked gendered constraint for these businesses: childcare. We collect field data through unannounced visits to a sample of microentrepreneurs in select areas of Uganda, combining surveys of business owners and real customers, as well as purchases by confederate buyers (i.e., mystery shoppers). We document that childcare duties in businesses are highly gendered: 37% of female owners bring small children to work, compared with 0% of men. Childcare duties are correlated with a “baby-profit gap,” as businesses where children are present earn 48% lower profits than even other female-owned businesses where a child is not present. Using our rich data, we analyze potential reasons why childcare obligations may affect profits. We find that prices, product quality, and other explanations are not robustly correlated with the presence of a baby. However, we find that women with children in the store are more likely to run out of stock than both men and women who do not have children in the store. Although we caution that our analysis is not causal, we consistently find that childcare duties are associated with profitability and may relate to the wider gender gap in business performance.