Working Paper: NBER ID: w27773
Authors: Nicola Fuchs-Schundeln; Dirk Krueger; Alexander Ludwig; Irina Popova
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; human capital; welfare effects; income distribution
JEL Codes: D15; D31; E24; I24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| COVID-19 school closures (I21) | children's human capital development (I25) |
| COVID-19 school closures (I21) | children's welfare (I39) |
| parental income shocks (G59) | children's welfare (I39) |
| school closures (J65) | increase in the future share of children without a high school degree (I21) |
| school closures (J65) | reduction in the share of children with a college degree (D29) |
| younger children (J13) | less human capital at older ages (J24) |
| less human capital (J24) | reduces marginal productivity of future parental investments (D15) |
| parental responses (J13) | mitigate negative impacts (F69) |
| lower-income households (R20) | stronger negative effects from school closures (I24) |