The Long-Term Distributional and Welfare E?ects of Covid-19 School Closures

Using a structural life-cycle model, we quantify the long-term impact of school closures during the Corona crisis on children a?ected at di?erent ages and coming from households with di?erent 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 di?erent 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 ?nd that parental reactions reduce the negative impact of the school closures, but do not fully o?set 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.