The Long-Term Distributional and Welfare Effects of Covid-19 School Closures

54 Pages Posted: 31 Aug 2020

See all articles by Nicola Fuchs-Schündeln

Nicola Fuchs-Schündeln

Goethe University Frankfurt

Dirk Krueger

University of Pennsylvania; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Goethe University Frankfurt; Netspar

Alexander Ludwig

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA); Goethe University Frankfurt

Irina Popova

Goethe University Frankfurt

Date Written: August 26, 2020

Abstract

Using a structural life-cycle model, we quantify the long-term impact of school closures during the Corona crisis on children affected at different ages and coming from households with different parental characteristics. In the model, public investment through schooling is combined with parental time and resource investments in the production of child human capital at different stages in the children’s development process. We quantitatively characterize both the long-term earnings consequences on children from a Covid-19 induced loss of schooling, as well as the associated welfare losses. Due to self-productivity in the human capital production function, skill attainment at a younger stage of the life cycle raises skill attainment at later stages, and thus younger children are hurt more by the school closures than older children. We find that parental reactions reduce the negative impact of the school closures, but do not fully offset it. The negative impact of the crisis on children’s welfare is especially severe for those with parents with low educational attainment and low assets. The school closures themselves are primarily responsible for the negative impact of the Covid-19 shock on the long-run welfare of the children, with the pandemic-induced income shock to parents playing a secondary role.

Keywords: Covid-19, school closures, inequality, intergenerational persistence

JEL Classification: D15, D31, E24, I24

Suggested Citation

Fuchs-Schündeln, Nicola and Krueger, Dirk and Ludwig, Alexander and Popova, Irina, The Long-Term Distributional and Welfare Effects of Covid-19 School Closures (August 26, 2020). PIER Working Paper No. 20-032, Available at SSRN: https://ssrn.com/abstract=3682116 or http://dx.doi.org/10.2139/ssrn.3682116

Nicola Fuchs-Schündeln

Goethe University Frankfurt ( email )

Grueneburgplatz 1
Frankfurt am Main, 60323
Germany

Dirk Krueger (Contact Author)

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Goethe University Frankfurt

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Alexander Ludwig

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA) ( email )

Amalienstrasse 33
Munich, 80799
Germany

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Irina Popova

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

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