May 2009
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: old-age security, public pension systems, fertility, altruism
JEL Classification: [D640] Altruism [H550] Social Security and Public Pensions [J130] Fertility; Family Planning; Child Care; Children; Youth
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Francesco C. Billari francesco.billari@unibocconi.it Vincenzo Galasso vincenzo.galasso@unibocconi.it
