Working Paper: CEPR ID: DP7014
Authors: Francesco C. Billari; Vincenzo Galasso
Abstract: 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.
Keywords: Altruism; Fertility; Old-age Security; Public Pension Systems
JEL Codes: D64; H55; J13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| fertility decisions (J13) | old-age security motive (H55) |
| Italian pension reforms of the 1990s (H55) | fertility rates (J13) |
| reduction in future pension benefits (J32) | fertility rates (J13) |
| reduced future pensions (J32) | increased family size (J12) |