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What explains fertilit? Evidence from Italian Pension reforms

  • Francesco Billari
  • Vincenzo Galasso

Why do people have kids in developed societies? We propose an empirical test of two economic theories of fertility — children as “consumption” or “investment” good. We use as a natural experiment the Italian pension reforms of the 90s, which by decreasing expected pension benefits generated a large negative income effect, with a sharp discontinuity across workers. This policy experiment is particularly well suited, since lower future pensions are expected to have differential effects on fertility under the “consumption” and "investment" theories. Empirical analyses identify a causal, robust positive effect of less generous future pensions on postreform fertility. These findings are consistent with an “old-age security” motive also for contemporary fertility in advanced societies or with the original Becker- Lewis (1973) version of the “consumption” theory, based on the interaction between quantity and quality of children.

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Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 369.

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Date of creation: 2010
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Handle: RePEc:igi:igierp:369
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