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What Explains Fertility? Evidence from Italian Pension Reforms

  • Francesco C. Billari
  • Vincenzo Galasso

Why do people have kids in developed societies? We propose an empirical test of two alternative theories — children as “consumption” vs. “investment” good. We use as a natural experiment the Italian pension reforms of the 90s that introduced a clear discontinuity in the treatment across workers. This policy experiment is particularly well suited, since the “consumption” motive predicts lower future pensions to reduce fertility, while the “old-age security” to increase it. Our empirical analysis identifies a clear and robust positive effect of less generous future pensions on post-reform fertility. These findings are consistent with “old-age security” even for contemporary fertility.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2646.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2646
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