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

Finance Webinar（2021-22）

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

Speaker: Dirk Krueger，the University of Pennsylvania

Time: Wednesday, May 26, 9:00–10:30 a.m. Beijing Time

Location: Microsoft Teams

Introduction

Dirk Krueger is the Walter H. and Leonore C. Annenberg Professor in the Social Sciences and Professor of Economics at the University of Pennsylvania. He also holds a secondary appointment at Wharton’s Finance department and is a Fellow of the Econometric Society. He is the editor of the International Economic Review, a Research Associate at the National Bureau of Economic Research and Penn’s Population Studies Center, a Research Fellow at the Centre for Economic Policy Research, a Research Fellow at Netspar, and a Research Fellow at the Center for Financial Studies at Goethe University Frankfurt.  

Abstract

Using a structural life-cycle model, we quantify the heterogeneous 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 the long-term consequences from a Covid-19 induced loss of schooling and find average losses in the present discounted value of lifetime earnings of the affected children of close to 1%, as well as welfare losses equivalent to about 0.6% of permanent consumption. 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.

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