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.