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What Explains Fertility? Evidence from Italian Pension Reforms

  • Billari, Francesco C.
  • Galasso, Vincenzo

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 C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7014.

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Date of creation: Oct 2008
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Handle: RePEc:cpr:ceprdp:7014
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