Fertility Decisions and Employment Protection: The Unintended Consequences of the Italian Jobs Act

We study the effect of a reduction in employment protection on fertility decisions. Using data from the Italian Labor Force Survey for the years 2013-2018, we analyze how the propensity to have a child has been affected by the 2015 Labor Market Reform, the so-called “Jobs Act”, which has essentially reduced the employment protection for large-firm employees and leaved largely unchanged that for small-firm ones. We employ a Difference-in-Differences identification strategy and compare the change over time in fertility decisions of women employed in large firms with the change experienced by women employed in small firms. We find that women exposed to the reduction in employment protection have a 1.4 percentage points lower probability of having a child than unexposed women. A battery of robustness checks confirms this finding. We document large heterogeneous effects by age, marital status, parity, geographic areas as well as by the level of education and wage. Our findings help understand the potential unintended consequences that labor market reforms introducing greater flexibility have on fertility decisions by increasing insecurity on career prospects.