How Childcare Supports Families and Businesses in Uganda
A new study from Uganda shows that childcare and cash grants improve women’s labor supply, household welfare, and early childhood outcomes—especially for single mothers and women entrepreneurs facing time and credit constraints.
Access to affordable childcare is often cited as a key factor in enabling women’s participation in the labor market. But in many low-income countries, evidence on its impact is scarce—and even less is known about how such support affects fathers, overall household income, or children’s outcomes. In a recently published study in the American Economic Journal: Applied Economics, researchers offered different types of support to Ugandan mothers of young children: free full-time childcare, a cash grant of equivalent value, or both.
The childcare subsidy increased full-day childcare enrolment by 150 percent compared to the control group, but the effects on labor supply varied by household structure. Among single mothers, access to childcare led to a 29 percent increase in employment and 45 percent higher income, primarily through expanded self-employment. These mothers were also more likely to invest in their businesses. In contrast, for mothers living with a partner, the subsidy had little effect on their own labor supply—but increased fathers’ wage employment and income. These findings suggest that time constraints are especially binding for single mothers, whereas in two-parent households, childcare may free up time that is reallocated within the household.
The cash grants had a broader impact on women’s labor supply across all household types. Mothers who received cash were 61 percent more likely to be self-employed and earned 37 percent higher business profits. The study highlights that credit constraints are a major barrier for women’s business development in Uganda.
Importantly, both childcare and cash transfers raised household income and consumption. Childcare also led to measurable improvements in children’s development, particularly in literacy and motor skills. However, while cash grants increased mothers' financial independence, they also led to higher reported rates of intimate partner violence—a finding that underscores the complexity of intra-household dynamics.
The researchers conclude that childcare support can be a cost-effective way to improve family welfare and child outcomes, especially when targeted toward single mothers. While cash grants are more effective in boosting women’s entrepreneurship, childcare investments yield broader household and developmental returns. In contexts where childcare is prohibitively expensive or unavailable, such policies can unlock both economic and social gains.
American Economic Journal: Applied Economics, Volume 17(2): 75 - 101