Do social protection expenditures predict female immigrant entrepreneurship? Evidence from the European Union

Since 1950, international migrants have consistently represented a relatively stable share of the world's population, at approximately 2.7%–3.3% (De Haas et al., 2019). Within this overall stability, however, immigration destinations have shifted markedly, with Western Europe emerging as a major hub, particularly over the past two decades (Lee et al., 2022). In absolute terms, international migration has expanded rapidly. The number of international migrants increased from 154 million in 1990 to 304 million in 2024, and Europe hosts about 94 million immigrants (European Commission, 2025). In the EU, non-EU citizens constitute roughly 6.4% of the population and foreign-born persons about 10%, compared with around 3.7% globally (European Commission, 2025). This growth has intensified debates on immigration policy and inclusion, and contributed to the EU Pact on Migration and Asylum, which establishes a new framework for managing immigration (European Commission, 2024).

These developments have intensified long-standing controversies over whether welfare states attract immigrants and how immigration reshapes social policy politics. One prominent line of debate is the so-called “welfare magnet hypothesis” (WMH), which links welfare policies to immigration patterns by claiming that immigrants may be attracted to countries with more generous welfare benefits, which reduce post-migration insecurity (Borjas, 1999). However, the nature of this relationship remains unclear (De Haas et al., 2019). Political debate in EU countries often swings between viewing welfare benefits as a pull factor for immigration and recognising immigrants as contributors to welfare-state sustainability (Gawel and Toikko, 2023; Häkkilä and Toikko, 2021). Rather than simply engaging with this debate, our study goes further by examining how social protection expenditures relate to female immigrant entrepreneurship (FIE) at the macro level as a pathway to facilitate their integration into the host country's labour market. In doing so, we build on prior research showing that supportive policy environments can promote entrepreneurship among female immigrants (Brieger and Gielnik, 2021).

Research on migrant entrepreneurship is highly contextual (Dabić et al., 2020), due to its various forms, including immigrant, transnational, ethnic, diaspora and refugee entrepreneurs (Kabbara and Zucchella, 2023; Yamamura and Lassalle, 2022). However, cross-national comparative analyses remain limited (Yasin and Hafeez, 2023), requiring a deeper intersectional understanding (Wiers and Chabaud, 2022). Moreover, the situation of immigrant women is specific due to the “double discrimination” arising from the intersection of gender and ethnicity faced by them (Gaweł and Toikko, 2024), and relatively under-researched (Brieger and Gielnik, 2021; Vershinina et al., 2019). Consequently, the role of social protection may differ for female immigrant entrepreneurs compared with other immigrant entrepreneurs, as their entrepreneurial choices are shaped not only by migrant status, but also by gendered labour-market barriers, family-care responsibilities and access to host-country institutions (Brieger and Gielnik, 2021; Chreim et al., 2018; Lassalle and Shaw, 2021). Recognising these complexities, we aim to inform inclusive economic participation and social integration policies by investigating FIE at the macro level across EU countries.

Immigrant entrepreneurship is often discussed within the framework of mixed embeddedness in home and host countries (Kazlou and Urban, 2023). This article investigates how the host country's institutional environment shapes entrepreneurial opportunities for immigrant women, referring to the host country embeddedness. Earlier research has found that social welfare systems in EU countries have converged since the early 1980s, with stronger convergence than in other OECD countries (Cornelisse and Goudswaard, 2002; Caminada et al., 2010). Social protection expenditures can be seen as a key indicator of the welfare state's efforts to achieve a range of policy objectives by investing in social welfare services (e.g. healthcare, child protection and support for the elderly) (Anyanwu and Erhijakpor, 2009). Women, who tend to represent a large proportion of socially marginalised groups, have long been portrayed as one of the main beneficiaries of welfare services (Detraz and Peksen, 2018). Yet research directly linking social protection expenditures to FIE remains limited. A few studies investigating the relationship between national social spending and entrepreneurship (Sandström et al., 2021) suggest that social spending negatively affects entrepreneurial activity (Solomon et al., 2022).

Recent policy debates and demographic changes in Europe, including increased immigration (Häkkilä and Toikko, 2021; Samers, 2023; Hoxhalli et al., 2024), evolving welfare policies (Halaskova, 2018; Miró, 2021; Vesan and Pansardi, 2021; De la Porte and Madama, 2022) and growing attention to gender equality (Guliyev, 2023), underscore the urgency of understanding how social protection expenditure shapes FIE. As European societies face ongoing challenges in immigrant integration (Häkkilä and Toikko, 2021; Kazlou and Urban, 2023; Samers, 2023; Purkayastha and Bircan, 2023; Hoxhalli et al., 2024) and welfare-state sustainability (Miró, 2021; Seeleib-Kaiser, 2016), this study examines the institutional determinants of FIE by addressing the research question: How do total and function-specific categories of social protection expenditure in EU countries relate to FIE?

By empirically examining these relationships using macro-panel data from EU countries covering 2006 to 2021, our study contributes to debates on immigration and welfare as well as to the entrepreneurship–public policy literature by examining how specific components of social protection systems shape FIE across EU countries. The results show that social benefit structures have differentiated macro-institutional associations, as the total level of social benefits spending, as well as higher spending on old age functions, promotes FIE by creating a more supportive structural environment through risk-buffering, whereas spending on family and children's benefits is associated with lower levels of entrepreneurship. This nuanced understanding of how welfare state design relates to female immigrant entrepreneurial activity bridges gaps across research on institutional context, gendered immigration and place-based policy, and it offers actionable insights for policymakers seeking to foster more inclusive entrepreneurial ecosystems.

Gendered migration patterns often position men as “first movers” who initiate migration, while women more often migrate later as “tied movers” joining family members. As a result, women may face distinct challenges in integrating into the host country (Föbker, 2019; Purkayastha and Bircan, 2023). When female immigrants integrate into host societies, they face larger employment gaps than male immigrants. Although these gaps tend to narrow relatively quickly, they do not fully close (Lee et al., 2022). Immigrant women's experiences vary by the reasons for immigration and the form it takes (Grotti et al., 2018). At the same time, integration into the host country's cultural and social context can potentially reconstruct their perceptions of gender roles, identities and relationships (Erdal and Pawlak, 2018; Pawlak and Goździak, 2020).

Entrepreneurial engagement is often viewed as a viable pathway for immigrants' integration into host societies (Vandor, 2021; Wiers and Chabaud, 2022), offering an alternative to wage employment. However, research on FIE remains limited (Gomez et al., 2024). Existing evidence suggests that entrepreneurship can help immigrant women move out of unemployment and avoid underemployment, and may represent a preferred livelihood strategy (Munkejord, 2017). At the same time, immigrant women entrepreneurs often experience intersecting disadvantages related to both gender and ethnicity (Chreim et al., 2018; Dy and Agwunobi, 2019). In many host-country contexts, they face a “double disadvantage” that combines gender-related barriers with ethnicity-based constraints (Kabbara and Zucchella, 2023). Put differently, these challenges reflect the intersection of patriarchal structures and outsider status (Lassalle and Shaw, 2021). As a result, the capabilities required to identify and pursue entrepreneurial opportunities may be constrained by the simultaneous status of being both a woman and an immigrant (Audretsch and Fiedler, 2023).

Entrepreneurship is often framed as a gendered phenomenon and stereotyped as a “man's world” (Hägg et al., 2023; Sanchez-Riofrio et al., 2023). Female entrepreneurs face gender-specific constraints rooted in social barriers, expectations, social norms and cultural beliefs, which can reproduce broader gender inequalities (Bonaparte et al., 2023; Gaies et al., 2023; Guliyev, 2023). The quantitative gender gap in entrepreneurship persists: in many regions, women remain a minority group among entrepreneurs, including in the EU countries (Gawel and Toikko, 2023; Ughetto et al., 2020), the United States (Bonaparte et al., 2023) and India (Baral et al., 2023; Dana et al., 2024).

Qualitative disadvantages also shape women's entrepreneurial trajectories. Female-owned businesses are sometimes perceived as less financially efficient, partly because they may pay higher wages and contribute more to local communities (Sanchez-Riofrio et al., 2023). In addition, female entrepreneurs are less likely to attract external finance (Morazzoni and Sy, 2022), and this funding bias appears particularly pronounced among women who have previously experienced entrepreneurial failure (Pistilli et al., 2022). At the same time, evidence that female-led start-ups translate innovation into growth more effectively than male-led firms suggests that underperformance is more likely driven by contextual constraints than by inherent gender differences (Arcuri et al., 2023).

Immigrants are often described as highly entrepreneurial, founding businesses at higher rates than native-born populations (Morales et al., 2022). At the same time, immigrant entrepreneurs frequently navigate oppressive stressors alongside substantial resilience (Cadenas et al., 2023). Prior research highlights both push and pull motivations and the role of mixed embeddedness in institutional contexts spanning home and host countries (Sinkovics and Reuber, 2021; Yamamura and Lassalle, 2022; Yasin and Hafeez, 2023). On the one hand, enterprises run by immigrants often perform worse than native enterprises, as they are more often micro enterprises with fewer jobs created and a lower chance of survival due to structural and social barriers, such as a lack of infrastructure and networks, and fewer access options (Solano et al., 2023). On the other hand, among the most prosperous global companies, some are established and run by immigrants (Yang et al., 2022). Family is widely recognised as a key source of social capital in entrepreneurship, but immigrant entrepreneurs often operate within transnational family arrangements, with close relatives located in both origin and destination countries (Arshad and Berndt, 2023; Ljungkvist et al., 2023).

Immigrant women sit at the intersection of these dynamics. They often share disadvantages associated with gendered roles and patriarchal structures. They also encounter constraints linked to outsider status and challenges specific to female immigrants, including limited agency and intensified family responsibilities (Lassalle and Shaw, 2021). Many enter entrepreneurship out of necessity, seeking to reconcile income needs with caregiving responsibilities and, in some cases, adapting their work trajectories to accommodate partners' careers (Senthanar et al., 2021). Their entrepreneurial engagement can be further limited by incomplete knowledge of the local environment, small-business scale, discrimination and settlement-policy constraints (Kalu and Okafor, 2021).

Prior entrepreneurial or leadership experience and the presence of entrepreneurial role models also shape immigrant women's entrepreneurial intentions (Lazarczyk-Bilal and Glinka, 2020). Recent evidence further suggests that different forms of capital matter in distinct ways: higher education may be associated with lower odds of entrepreneurship, whereas family and financial capital increase the likelihood of entrepreneurial entry (Gomez et al., 2024). Qualification-related barriers are especially salient when credentials are difficult to recognise in destination countries (Zybura et al., 2018). These human-capital, financial and networking constraints appear even more pronounced for immigrant women entering technology entrepreneurship (Pugalia and Cetindamar, 2022).

On the other hand, entrepreneurship can enable immigrant women to renegotiate social status by questioning or reaffirming gender relations as they start, build and run businesses (Villares-Varela and Essers, 2019). Evidence also suggests that the cultural and social environments surrounding immigrant female entrepreneurs can support the management of multi-layered identities across countries (Kabbara and Zucchella, 2023). In addition, women's empowerment in the host country appears to facilitate immigrant women's entry into entrepreneurship (Gaweł and Toikko, 2024). For many, entrepreneurship is pursued not only to improve family finances and personal independence, but also to achieve self-fulfilment and to build social ties and community affiliations (De Luca and Ambrosini, 2019).

These characteristics constitute the uniqueness of FIE. While migrant entrepreneurs in general may be constrained mainly by market access, regulation, networks and finance (Dabić et al., 2020; Solano et al., 2023), immigrant women's entrepreneurial decisions are also shaped by whether self-employment is compatible with caregiving, family migration trajectories and household security (Lassalle and Shaw, 2021; Senthanar et al., 2021; Vershinina et al., 2019). Welfare and family policies may therefore matter more directly for female immigrants than for migrant entrepreneurs as a broad category, because such policies influence the time, risk and care conditions under which entrepreneurship becomes feasible (Brieger and Gielnik, 2021; Chreim et al., 2018).

The institutional context shapes entrepreneurship, particularly the regulatory pillar, which comprises standards, rules and processes necessary for establishing and operating a venture (Audretsch et al., 2024). Institutional theory is widely used in female entrepreneurship research (Baral et al., 2023). It argues that institutions structure societal decision-making and that institutional quality shapes entrepreneurial conditions: weak institutions increase uncertainty and risk, whereas stronger institutions improve the business environment and support entrepreneurial activity (Boudreaux, 2017; Haini et al., 2023). Hence, institutions are supposed to provide a minimum level of certainty when entrepreneurial risks are taken (Sendra-Pons et al., 2022).

The regulatory environment of host-country institutions is crucial for explaining cross-national differences in immigrant entrepreneurship (Yasin and Hafeez, 2023), and changes in immigrant entrepreneurship over time (Kazlou and Urban, 2023). Recent work highlights how business registration procedures, citizenship policies and access to social services directly affect entrepreneurial opportunities (Koroutchev, 2024) and the growing emphasis on policy responsiveness and inclusive support in Europe (Hoxhalli et al., 2024). More broadly, entrepreneurship policy is not only about “more” or “less” intervention, but also about the design choices and trade-offs embedded in policy visions and agendas (Lucas et al., 2018; Arenal et al., 2019). Case studies further illustrate that immigrant entrepreneurs in Ireland face financing and policy barriers (Cooney and Brophy, 2024), while female entrepreneurs in Pakistan benefit from science parks and commercialisation support (Murad et al., 2024). However, understanding of which specific regulations matter and how they impact immigrant entrepreneurship remains limited (Solano et al., 2023). These findings underscore the need for research that moves beyond broad claims to identify specific regulatory factors, particularly gender-sensitive policy instruments, and to advance a more intersectional understanding of immigrant entrepreneurship.

A welfare state is based on the notion that a country has a range of redistributive processes, defined by the level of public expenditure on social protection, in order to use social policies to provide equal opportunities and create an adequate welfare context (Diamond and Lodge, 2013). The nature of the welfare state shapes social protection systems across EU countries (Halaskova, 2018). Traditionally, the EU welfare states have affected social and employment policies mainly through regulation rather than through the core activities of social policy (health and welfare services, social insurance, public assistance) (De la Porte and Madama, 2022). Recently, a growing number of scholars have argued that a social turn has occurred in the EU (Miró, 2021), whereby the social-retrenchment narrative is gradually being abandoned in favour of a discourse that is centred on social rights and social investment (Vesan and Pansardi, 2021). Social investment has been considered a welfare strategy that extends the focus of welfare state provision from after-income compensation to risk prevention and capacity-building, as a complement to social protection (Garritzmann et al., 2022; Hemerijck, 2017; Hemerijck et al., 2023).

However, welfare policies have been identified as a potentially important, yet often neglected, factor shaping immigrant entrepreneurship (Samers, 2023). As Villares-Varela et al. (2017) and Brieger and Gielnik (2021) note, the immigrant entrepreneurship literature has paid limited attention to family and gender, even though welfare arrangements likely influence both. Men's entrepreneurial activity and, more broadly, labour supply are typically less constrained by childcare and family responsibilities within the household (Eddleston and Powell, 2012).

Research on institutional determinants of female entrepreneurship has therefore focused primarily on formal arrangements that support work–family balance, including parental leave, flexible working-time provisions and subsidised childcare. This emphasis aligns with evidence that the effectiveness of entrepreneurship support depends on how policy instruments are designed and delivered within women's support ecosystems (Nziku and Henry, 2020; Turley et al., 2024). Meanwhile, a consistent finding is that in contexts where formal family-friendly policies are weak or absent, mothers may turn to self-employment as a fallback strategy to reconcile paid work and caregiving (Arráiz, 2018; Thébaud, 2015). Conversely, more supportive family and childcare policies and services can facilitate entrepreneurship among parents, particularly women, by easing care constraints and enabling sustained entrepreneurial activity, especially during the early and often most challenging years of a venture (Chreim et al., 2018). Thus, an overall supportive business environment is thought to tend to encourage the development of female entrepreneurs and reduce gender inequality (Wang and Lin, 2019). For female immigrants, these policy mechanisms are likely to be especially important when welfare support is combined with accessible services (Brieger and Gielnik, 2021; Chreim et al., 2018).

In addition, evidence from China suggests that public health insurance is generally associated with higher rates of entrepreneurship (Liu and Zhang, 2018; Shi et al., 2021). By contrast, economists have argued that unemployment insurance can lower barriers to entry into entrepreneurship but may also reduce both the number and the average quality of entrepreneurs (Hombert et al., 2020). Focusing on France, Samers (2023) examines policy changes in three welfare fields (childcare, health insurance and unemployment insurance) since approximately the 1980s. He shows that immigrant-related expenditure in these areas has fluctuated and sometimes declined, but has generally increased since the early 2000s, a trend that coincides with only modest growth in immigrant entrepreneurship. However, welfare policies do not appear to have a significant impact on the level or survival of immigrant entrepreneurship in France.

Building on this background, we understand the relationship between social protection expenditure and FIE through three related mechanisms. First, social protection may operate as a risk-buffering mechanism. Because immigrant women often face weaker host-country networks, limited access to finance, discrimination and family-care constraints (Brieger and Gielnik, 2021; Chreim et al., 2018; Senthanar et al., 2021), a stronger welfare state may reduce the perceived downside risk of entrepreneurial entry and create a more secure institutional environment for starting and sustaining a business (Boudreaux, 2017; Sendra-Pons et al., 2022). Second, social protection may shape care constraints. Welfare arrangements related to childcare, health care and old age may reduce household insecurity and release time for economic activity, but family-related benefits may also make home-based caregiving more viable or reduce the need for necessity entrepreneurship (Eddleston and Powell, 2012; Thébaud, 2015; Wang and Lin, 2019). Third, social protection may affect opportunity costs. It may encourage opportunity-oriented entrepreneurship by reducing insecurity, while also discouraging necessity-based entrepreneurship when benefits or alternative employment pathways become more accessible (Solomon et al., 2022; Thébaud, 2015).

Social spending therefore remains a contested issue in national policy and entrepreneurship debates, as policy researchers disagree about whether it promotes or discourages entrepreneurial activity (Solomon et al., 2022). These competing mechanisms are especially important for female immigrant entrepreneurs, whose entrepreneurial decisions may reflect both opportunity-seeking and constrained responses to labour-market exclusion, care responsibilities and institutional access (Chreim et al., 2018; Senthanar et al., 2021; Thébaud, 2015). Despite considerable debate about social spending and entrepreneurship, very few studies investigate this topic (Sandström et al., 2021), and empirical research on social protection expenditure as a value factor for female immigrant entrepreneurs remains limited.

Therefore, two hypotheses can be developed. First, total social protection benefits expenditure may be positively associated with FIE through a risk-buffering mechanism. Entrepreneurship involves income uncertainty, business failure risk and limited access to finance (Morazzoni and Sy, 2022; Solomon et al., 2022). These risks may be particularly salient for immigrant women, whose entrepreneurial choices are shaped by gendered care responsibilities, migrant status, limited host-country networks and discrimination (Brieger and Gielnik, 2021; Chreim et al., 2018). A more extensive welfare state may therefore reduce perceived downside risk and create a more secure institutional environment for entrepreneurial activity (Boudreaux, 2017; Sendra-Pons et al., 2022). Therefore, the following hypothesis is formulated:

Second, social protection expenditure should not be treated as a uniform welfare resource due to the mechanisms of care constrains and opportunity costs. As childcare, health care and old age arrangements (Eddleston and Powell, 2012; Thébaud, 2015; Wang and Lin, 2019) release time for women's professional activity, and reduce economic insecurity, it shifts the immigrant female entrepreneurship towards opportunity driven. Therefore, its function-specific composition may shape FIE through different mechanisms, which is reflected in the hypothesis:

To investigate the association between welfare state arrangements and FIE and address the hypotheses, we conducted an empirical analysis across EU countries. We assessed whether and how social protection expenditures, a key element of the welfare state, are associated with FIE, while controlling for relevant socio-economic factors. Initially, we intended to include all 27 EU countries; however, due to limited data availability, we excluded three of them (Bulgaria, Romania and Slovakia). The final sample therefore covers 24 EU countries: members of the EU: Austria, Belgium, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovenia, Spain and Sweden.

We used openly available secondary data from Eurostat for the period 2006–2021, which allowed us to construct a macro-panel dataset with 24 countries (N = 24) observed over 16 years (T = 16). Macro-panel designs are well-established in entrepreneurship research, including studies on women's entrepreneurship (Hechavarría et al., 2024; Jafari-Sadeghi et al., 2021). Variable definitions and measurement are reported in Table 1. Our dependent variable is the FIE rate, referring conceptually to entrepreneurial activity undertaken by immigrant women in the host country. Following standard measures in the literature, we operationalise it as self-employment, regardless of legal form and whether the business has employees (Gaies et al., 2023; Gomez et al., 2024). To strengthen robustness, we constructed four alternative FIE indicators based on two immigration definitions (foreign-born vs foreign citizenship) and two denominators (all entrepreneurs vs female entrepreneurs): (1) foreign-born women as a share of all entrepreneurs; (2) foreign-born women as a share of female entrepreneurs; (3) women with foreign citizenship as a share of all entrepreneurs and (4) women with foreign citizenship as a share of female entrepreneurs.

The independent variables capture welfare-state policies at both the aggregate and functional levels. To provide an overall picture, we use total social protection benefits expenditure, defined as the country-level share of GDP spent on all social protection benefit functions (Eurostat, 2019). We then examine whether specific social protection functions are differentially associated with FIE by including function-specific expenditures for sickness and health care, disability, old age, family and children and unemployment, each measured as a share of GDP. Our selection of social protection benefit expenditures is grounded in their use as a key proxy for welfare-state policy effort in prior research (Samers, 2023; Santos and Simões, 2025). Measuring expenditure as a share of GDP provides a robust indicator of the intensity of state commitment across policy areas. By disaggregating expenditures into function-specific expenditures, we can move beyond aggregate measures and examine the differentiated impact of welfare policies. By using these indicators, we can capture not only the overall level of social protection across countries but also its functional composition, which reflects political and institutional priorities in supporting different social groups. This approach strengthens the explanatory power of our study and contributes to understanding the macro-level institutional drivers of FIE.

We also included three control variables in our estimations: Gini index, governmental expenditures and female unemployment rates. Government expenditures and unemployment rates are often used as control variables while modelling entrepreneurship (Audretsch et al., 2024), as they capture the broader economic environment and labour market conditions that influence entrepreneurial activity. Additionally, the Gini index as a predictor of entrepreneurship was explored in the context of institutional quality and opportunity structures (Haini et al., 2023), which also motivated us to include this control variable. Including these variables allows us to isolate the effects of social protection expenditures more accurately, ensuring that our results are not driven by broader macroeconomic or inequality-related factors.

To linearise the relationships among variables and fulfil the standard assumption in economic theories of constant elasticity, we transformed all raw data into logarithms, a common research practice (Tarabar, 2018; Jones and Kaya, 2023; Santos and Simões, 2025). As the appropriate method for panel data, we employed panel regression with fixed or random effects, based on the results of the Breusch-Pagan and Hausman tests. Panel regression models with fixed-effects or random-effects are commonly used in investigating entrepreneurship (Tarabar, 2018; Jafari-Sadeghi et al., 2021; Gaies et al., 2023; Hechavarría et al., 2024) and gender inequalities (Das and Mondal, 2022; Gao and Tian, 2023), based on cross-country and cross-year panel data, with the Hausman test to determine the effect (Gaies et al., 2023; Guliyev, 2023). This approach allows us to account for both country-specific unobserved heterogeneity and temporal dynamics, making it particularly suitable for analysing macro-panel data. Fixed effects control for unobservable, time-invariant country characteristics, while random effects provide efficiency gains under the assumption that individual effects are uncorrelated with the regressors. Alternative methods, such as pooled OLS, may ignore country-specific differences and yield biased estimates, whereas cross-sectional analysis misses important temporal changes in welfare policies and entrepreneurship.

While endogeneity is a potential concern in empirical research, we argue that it is likely limited in this study. In particular, selection bias should be attenuated because female immigrants in the EU often migrate for family reunification, asylum or employment opportunities, rather than in response to variation in social protection expenditures. Additionally, social protection expenditures are largely determined by long-term political and institutional factors that move relatively slowly compared to the scale and timing of FIE.

To exclude the risk of collinearity among variables, variance inflation factor (VIF) tests were conducted before modelling the regressions. The VIF values were significantly below the commonly accepted threshold of 10, as used in entrepreneurship research (Audretsch et al., 2024; Hechavarría et al., 2024). The highest VIF value was 3.537, which allowed us to estimate models with all initial variables included.

When estimating the first models, social protection benefits expenditures were accepted as the independent variable (Table 2, models 1–4). All four models demonstrate that social protection benefits are a statistically significant independent variable, positively associated with entrepreneurship among immigrant women. Increases or decreases in social protection benefits expenditures are accompanied by corresponding changes in FIE. The value of regression parameters, showing the strength of the relationship, is relatively high; the highest compared to the control variables.

The second group of models investigates the influence of expenditures on sickness and health care function, as the independent variable, on FIE (Table 3, models 5–8). The results of robustness tests show that across all four models, the regression parameters were statistically insignificant. Therefore, the relationship between expenditures on sickness and health care function and FIE cannot be fully proven.

In the third group of models, the influence of expenditure on the disability function is considered as the independent variable (Table 4, models 9–12). In this group of models, the results cannot be clearly interpreted. When FIE is investigated based on their foreign country of birth, the impact of expenditures on the disability function is negative and statistically significant. However, when immigrant women entrepreneurs are investigated using foreign citizenship, expenditures on the disability function show a positive but statistically insignificant association. In line with the principles of robust testing, we assume that this relationship cannot be proven.

In the fourth set of models, we include expenditure on the old age function as the key independent variable (Table 5, Models 13–16). Across all four specifications, old age expenditure is statistically significant and positively associated with FIE. Increases or decreases in old age expenditure are accompanied by corresponding increases or decreases in FIE. The estimated coefficients are relatively large and exceed those of the control variables, suggesting a comparatively strong association.

While estimating the fifth group of models (Table 6, models 17–20), expenditures on the family and children function were treated as the independent variable. All four models show that expenditures on the family and children function are a statistically significant predictor of FIE. The regression parameters across all functions are negative, which indicates a negative association. Higher expenditures on family and children's benefits are associated with lower levels of FIE. The values of the regression parameters, which indicate the strength of the relationship, are comparable to those of some of the control variables.

Lastly, in the sixth group of models, we investigate the impact of expenditures on the unemployment function as the independent variable (Table 7, models 21–24). Despite the case for all four models, the regression parameters were positive; however, in two models (models 21 and 22, with foreign country of birth as the measure of immigration), the impact was statistically insignificant. The robust tests indicate that the influence of expenditures on the unemployment function of FIE cannot be fully proven.

To examine whether the baseline associations reflect institutional conditions rather than cross-country differences in the size of immigrant populations, we conducted an additional robustness analysis controlling for immigration intensity. Keeping the conceptualisation of immigration based on foreign-born status and foreign-country citizenship, we measured migration intensity using two alternative indicators: the share of the foreign-born population (FCB) and the share of foreign citizens in the total population. As expected, both measures of immigration intensity were strongly correlated with the corresponding indicators of FIE, reflecting differences in the size of the relevant immigrant population across countries. In contrast, their correlations with total and function-specific social protection expenditure and the remaining control variables were generally weak or modest, suggesting that immigration intensity captures a distinct contextual characteristic rather than overlapping with the institutional variables included in the baseline models.

We then re-estimated the six core model specifications covering the three principal findings of the baseline analysis, namely total social protection expenditure (models 1 and 3), old-age expenditure (models 13 and 15) and family and children's expenditure (models 17 and 19), under both definitions of immigrant status (FIEBinTE and FIECinTE as dependent variables). Subsequently, we repeated the same estimation procedures as in the baseline analysis; all variables were logged, and the choice between panel regression with fixed or random effects was based on the results of the Breusch–Pagan and Hausman tests.

As shown in Table 8, the results remain substantively similar after controlling for immigration intensity. Total social protection expenditure remains positively and statistically significantly associated with FIE, regardless of whether immigrant status is defined by country of birth or citizenship. Likewise, expenditures on the old-age function continue to exhibit a positive and significant relationship with FIE across both measures. In contrast, expenditures on the family and children function retain their negative and statistically significant association with FIE. The consistency in the direction and statistical significance of the estimated coefficients indicates that the effects of social protection expenditures are not driven by cross-country differences in the size of the immigrant population, thereby reinforcing the validity of the baseline results.

For interpretive caution, we discuss only those relationships confirmed by all robustness tests, namely, total social protection expenditures, old-age benefits expenditures and family and children's benefits expenditures. Overall, the positive association between total social protection expenditure and FIE aligns with H1 and the risk-buffering mechanism, suggesting that more extensive welfare provision may reduce perceived downside risk and create a more secure institutional environment for entrepreneurial activity (Boudreaux, 2017; Sendra-Pons et al., 2022). Moreover, our findings suggest that social protection expenditure is not uniformly associated with FIE; rather, the direction of association differs by welfare function, supporting H2. The positive association for old-age expenditure may reflect broader life-course security and reduced household insecurity (Hemerijck, 2017; Hemerijck et al., 2023), rather than direct entrepreneurial support. By contrast, the negative association for family and children's benefits highlights the ambivalence of family policy. Such benefits may support work–family reconciliation in some designs, but they may also reduce the necessity of self-employment or reinforce gendered caregiving expectations (Eddleston and Powell, 2012; Thébaud, 2015; Wang and Lin, 2019), reflecting the mechanisms of care constrains and opportunity costs. These findings yield several theoretical contributions.

Firstly, by focusing on EU countries, which are more welfare-state oriented than many other regions (Caminada et al., 2010), we examine how social protection expenditure relates to FIE. This shapes both the EU's attractiveness to immigrants and the conditions for entrepreneurship. While mainstream economics often views social spending as a disincentive, this perspective is often motivated by a free-market, small government approach (Solomon et al., 2022). Our results, showing positive associations with total social protection expenditure and old age expenditure, are consistent with research emphasising the importance of institutional quality and supportive policy environments for women's entrepreneurial activity (Haini et al., 2023; Brieger and Gielnik, 2021; Lazarczyk-Bilal and Glinka, 2020). By contrast, our findings do not align with Samers (2023), who concludes that welfare-state policies do not influence immigrant entrepreneurship, as well as challenge the view that social spending primarily discourages entrepreneurial activity (Solomon et al., 2022), which is often explained through incentive, opportunity-cost or crowding-out mechanisms: generous welfare provision may reduce the need for necessity entrepreneurship, make non-entrepreneurial income sources more attractive or be associated with redistributive arrangements that lower expected entrepreneurial returns. Accordingly, our findings, by focusing on FIE and social protection, refine previous research and shows the risk-buffering mechanism of social spending in this context.

Secondly, European social policy debates have increasingly shifted from consumption-oriented benefits, addressing risks such as unemployment and retirement, to investment-oriented measures such as family benefits and training (Seeleib-Kaiser, 2016). Our finding that family and children's benefits are negatively associated with FIE is consistent with Thébaud (2015), who observed that generous family support may reduce women's motivation to pursue entrepreneurship as a strategy for balancing work and family. However, this contrasts with evidence that childcare support tends to increase women's labour force participation (Müller and Wrohlich, 2020). Together, these findings underscore the complexity of welfare components and the importance of policy design and target groups. The negative association observed for family and children's benefits warrants further investigation, including comparisons with female entrepreneurs overall and with male immigrant entrepreneurs. At present, we lack sufficiently precise evidence on how family and children's benefits shape entrepreneurship for both female and male immigrants.

Thirdly, by focusing on female immigrants, who may face compounded disadvantages linked to both gender and migrant status, we respond to recent calls for intersectional analyses (Chreim et al., 2018; Sendra-Pons et al., 2022). Female migrants should be treated as a unique subgroup of migrant entrepreneurs, because their entrepreneurship is shaped by gendered household arrangements, constrained agency and care responsibilities, alongside migration networks and regulatory barriers (Brieger and Gielnik, 2021; Lassalle and Shaw, 2021; Senthanar et al., 2021). Welfare institutions may therefore affect their entrepreneurship through time, care and household risk, not only through business incentives (Eddleston and Powell, 2012; Thébaud, 2015). This group remains less studied than entrepreneurship in general (Chreim et al., 2018). Moreover, immigrant women's access to social benefits may be constrained, limiting the extent to which entrepreneurship represents a simple choice between business activity and benefit receipt. Even so, the overall level of social protection and social insurance reflects broader social safety and caring values in a country (Samers, 2023). Operating in contexts with more extensive welfare provision may reduce perceived downside risk and create an institutional environment in which immigrant women feel more secure when starting and sustaining a business. In this sense, our results support the view that institutions can reduce risk and facilitate entrepreneurial risk-taking (Sendra-Pons et al., 2022).

Finally, market barriers may be more severe for migrants than for non-migrants (Evans, 1989), and women may be pushed into self-employment when unemployed or facing unfavourable labour market conditions. However, when immigrant families have access to formal arrangements that reduce work-family conflict, entrepreneurship may be less necessary as a backup employment strategy. From this perspective, social benefits may also support immigrants' entry into paid employment by easing household constraints and stabilising income (Ulceluse, 2016).

This study sheds light on how social policy can support FIE and clarifies the relationship between entrepreneurship and public policy. Our findings have implications for both advanced and developing economies, particularly those facing employment challenges and debates about the government's role in job creation versus enabling entrepreneurship. The results point to the importance of a balanced welfare approach. While investment in old age benefits may support women's economic participation, generous family and children's benefits may unintentionally discourage immigrant women from pursuing entrepreneurship. Social protection policies should therefore provide financial security while also creating conditions that facilitate FIE. Support programmes should address both institutional barriers and cultural expectations to strengthen the contribution of social spending to economic integration. Therefore, the mechanisms discussed in this article should be understood as theoretically informed interpretations of macro-level associations, rather than as directly observed individual-level processes.

This study has several limitations. First, due to data availability, we excluded three EU countries (Bulgaria, Romania and Slovakia) from our analysis, which may limit the generalizability of our findings. Second, our analysis relies on secondary Eurostat data, which may introduce reporting biases or measurement errors. Third, our macro-level approach does not capture individual-level or qualitative insights that could deepen understanding of underlying mechanisms. Next, despite these precautions, we cannot fully rule out endogeneity. Dynamic interactions may exist; for example, past levels of FIE could influence social protection policies, and vice versa.

Future research could address these limitations by incorporating a broader set of countries and combining macro-level analyses with individual- or firm-level data to provide greater depth. Qualitative or mixed-methods studies could further illuminate the contextual factors behind our results, and longitudinal studies would help assess the long-term impacts of policy changes in this topic. Future research could also use micro-level data, instrumental variable approaches or dynamic panel techniques, such as system GMM, to more rigorously account for potential endogeneity.

To conclude, as immigration increasingly shapes social, economic and political debates, understanding how social spending functions, not only as a welfare mechanism, but also as a potential social investment, is crucial for discussions on employment and entrepreneurship. This study advances the understanding of FIE by demonstrating how it is affected by welfare state spending. Using macro-panel data from European Union countries, we show that higher overall social protection expenditure and spending on old-age benefits are associated with increased female immigrant entrepreneurial activity, while expenditures on family and children's benefits reduce it. These findings suggest that social protection systems can simultaneously enable and constrain entrepreneurship, depending on how support is targeted and embedded within gendered institutional contexts. By linking welfare state design to the entrepreneurial outcomes of an under-researched population, our study contributes to debates on inclusive entrepreneurship and place-based policy. From this perspective, both social benefits and entrepreneurship can be viewed as central components of immigration policy, which policymakers should also consider.