Effects of Childcare Activities on the Duration of Self–Employment in Europe *

Abstract

This article examines the determinants of success in self–employment, with a focus on the effects of the time spent caring for children. Many public policies are designed to encourage self–employment, especially among women. In addition, it has been argued that one of the reasons individuals, and women in particular, choose self–employment over wage and salary sector employment is to spend more time with their children. The effect of time spent with children on the probability of continuing in self–employment has not been studied in previous work, however. This study analyzes spells of self–employment among workers in eight European nations. Using data from the European Community Household Panel survey for 1994–1999, we estimate the effect of time spent caring for children on the duration of self–employment, controlling for other factors that affect self–employment success rates. The estimates indicate that caring for children significantly reduces the duration of self–employment ventures, for both males and females, and in most countries studied. The results suggest that policy makers need to consider child care policies in conjunction with self–employment policies.