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What Explains Fertility? Evidence from Italian Pension Reforms

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 Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 209.

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Date of creation: 28 Nov 2008
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Handle: RePEc:sef:csefwp:209
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