We examine the tradeoff between household entrepreneurship and fertility exploiting
China's two-child policy. We find that households with a married woman aged
20 to 40 are less likely to engage in entrepreneurship but more likely to have an additional
child following the policy change. This tradeoff is driven by heightened effective
risk aversion after childbirth: increased fertility raises the minimum required
consumption, which magnifies the perceived cost of entrepreneurial risk. The negative
effect is more pronounced among households with higher subsistence consumption
requirements, tighter financial constraints, greater income volatility, and weaker intrahousehold
risk sharing, supporting risk aversion as the key mechanism. We also find
stronger effects among households whose first child is a daughter, reflecting son preference.
Our findings suggest that demographic policies can unintentionally suppress
entrepreneurial activity by increasing household sensitivity to risk.