published in: Journal of Population Economics, 2002, 15 (3), 549–573
Economic models of household behavior typically yield the prediction that increases in
schooling levels and wage rates of married women lead to increases in their labor supply and
reductions in fertility. In Italy, as well as in other Southern European countries, low labor
market participation rates of married women are observed together with low birth rates. Our
proposed explanation for this apparent anomaly involves the Italian institutional structure,
particularly as reflected in rigidities and imperfections in the labor market and characteristics
of the publicly-funded child care system. These rigidities tend to simultaneously increase the
costs of having children and to discourage the labor market participation of married women.
We analyze a model of labor supply and fertility, using panel data from the Bank of Italy
which have been merged with regional data describing the available opportunities in each
sample household’s environment. The empirical results show that the availability of child care
and part time work increase both the probability of working and having a child. Policies which
would provide more flexible working hours choices and greater child care availability would
aid in reducing the financial burden of children.
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