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We study whether (and why) self-employed individuals have higher fertility than employees.
Macro- and micro-level studies have produced inconsistent findings. Self-employment has been associated with income uncertainty and instability and may be negatively related to fertility. However, self-employment also implies workplace flexibility and higher potential income and may positively affect fertility. These mechanisms operate differently for men and women. We use the Italian Survey on Household Income and Wealth for 1995-2014, which includes objective and subjective fertility measures, and distinguish between three types of self-employment: laborer (solo) self-employment, entrepreneurship, and professionals. We show that all self-employed men and laborer self-employed women have higher fertility than comparable wage earners of the same sex. Using an instrumental variable treatment-effect regression approach and work histories, we show that self-employment causes higher fertility. We provide evidence that male and female entrepreneurs have more children because they would like to pass their business to their offspring (and rely on the family labor supply). Contrary to the US studies, Italian women do not perceive self-employment as facilitating work-life balance or encouraging childbearing.

The standard model of household behavior predicts that couples cooperate to maximize family income. This paper shows that gender identity norms repre- sent an important friction preventing family income maximization. For identi- fication, we focus on an Italian policy that grants a large tax credit to the main earner in a couple when the second earner reports income below a cutoff. Using new tax returns data, we show large bunching responses at the tax credit cut- off from second earner women, but no response from second earner men. This result suggests that household decisions are not Pareto-efficient when men are the second earner within the couple. Gender differences in bunching mostly emerge after marriage and childbirth, and do not reflect any gender-specific dif- ference in scope for bunching. In support of the view that gender norms drive our results, we find that gender differences in bunching are relatively larger among immigrants coming from more conservative societies, and natives liv- ing in more gender-traditional municipalities. Additionally, these results have important implications for gender inequality: we show that the spouse tax credit persistently limits women’s careers and amplifies the gender income gap.