Why do we really have children?
Couples in industrialized societies are having fewer children than they used to. What are the reasons for this? Or, even more fundamentally, why do parents decide to have children at all in contemporary developed countries? The authors of CEPR DP7014 seek to address these issues, focusing on the two main motives for childbearing often cited: children as a 'consumption' vs. an 'investment' good.
Using as a natural experiment the Italian pension reforms of the 1990s that suddenly - and substantially - decreased pension prospects for a large group of individuals, the authors find that people with lower pension income prospects as a result of the reforms have significantly higher fertility. The relative increase in the probability of them having a child is above 10%.
The findings support the 'old-age security' theory where children are seen as a source of future financial support for their retired parents, as opposed to the traditional 'consumption' motive which suggests that a reduced pension income should lead to a reduction in parents' consumption and, therefore, fertility.
Summary by CEPR staff
Topics: Welfare state and social Europe