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.