Employment protection and fertility: Evidence from the 1990 Italian reform

The aim of this paper is to investigate the effects of Employment Protection
Legislation (EPL) on fertility decisions of Italian working women. The main hypothesis is
that increased EPL reduces future job insecurity feelings and positively affects a
female worker’s proneness to take childbearing decisions. We use linear and semiparametric
difference in difference (DID) to control for possible sorting effects related to time-invariant
unobservables. We also use instrumental DID to account for the effects of time varying
unobservables in sorting. All estimators nicely support our research hypothesis. In addition,
our results confirm traditional economic and sociological theoretic explanations of the current
fertility trend in Italy.