A trivariate model of participation, fertility and wages: the Italian case

Italy has unusually low fertility by Organization of Economic Cooperation and Development standards, accompanied by unusually low female participation in paid work. This paper addresses the issue of the empirical relationship between fertility, female participation in the labor market and wages with these Italian "peculiarities" as a backcloth. A trivariate model of participation, fertility and wages has been constructed and estimated using three pooled cross-sections of Italian micro data, allowing for the identification of cohort effects. This model follows a "purist" approach: the participation and fertility decisions, as well as the wage equation, are modeled as completely joint. The cohort effects turn out to be significant: the point estimates do not appear to confirm actual trends, which are negative for fertility and positive for participation. The female wage is the most important variable influencing the propensity to have children and the propensity to participate in the labor market, casting doubt on suggestions that observed trends are the products of shifts in women's "tastes".