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

55 Pages Posted: 21 Sep 2020

See all articles by Nicola Fuchs-Schündeln

Nicola Fuchs-Schündeln

Goethe University Frankfurt

Alexander Ludwig

Leibniz Institute for Financial Research SAFE; University of Cologne - Faculty of Management, Economics and Social Sciences

Irina Popova

Goethe University Frankfurt

Dirk Krueger

University of Pennsylvania

Multiple version iconThere are 4 versions of this paper

Date Written: September 18, 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 Ludwig, Alexander and Popova, Irina and Krueger, Dirk, The Long-Term Distributional and Welfare Effects of Covid-19 School Closures (September 18, 2020). SAFE Working Paper No. 290, Available at SSRN: https://ssrn.com/abstract=3696313 or http://dx.doi.org/10.2139/ssrn.3696313

Nicola Fuchs-Schündeln

Goethe University Frankfurt ( email )

Grueneburgplatz 1
Frankfurt am Main, 60323
Germany

Alexander Ludwig (Contact Author)

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

University of Cologne - Faculty of Management, Economics and Social Sciences ( email )

Albertus-Magnus-Platz
Cologne, D-50923
Germany

HOME PAGE: http://www.wiso.uni-koeln.de/cmr/alexludwig

Irina Popova

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Dirk Krueger

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

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