DP16663 The Fiscal and Welfare Effects of Policy Responses to the Covid-19 School Closures
Using a structural life-cycle model and data on school visits from Safegraph and school
closures from Burbio, 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. Our data suggests that secondary schools were closed for
in-person learning for longer periods than elementary schools (implying that younger children
experienced less school closures than older children), and that private schools experienced
shorter closures than public schools, and schools in poorer U.S. counties experienced
shorter school closures. We then extend the structural life cycle model of private and
public schooling investments studied in Fuchs-Schündeln, Krueger, Ludwig, and Popova
(2021) to include the choice of parents whether to send their children to private schools,
empirically discipline it with data on parental investments from the PSID, and then feed
into the model the school closure measures from our empirical analysis to quantify the
long-run consequences of the Covid-19 school closures on the cohorts of children currently
in school. Future earnings- and welfare losses are largest for children that started public
secondary schools at the onset of the Covid-19 crisis. Comparing children from the top to
children from the bottom quartile of the income distribution, welfare losses are ca. 0.8
percentage points larger for the poorer children if school closures were unrelated to income.
Accounting for the longer school closures in richer counties reduces this gap by about 1/3.
A policy intervention that extends schools by 3 months (6 weeks in the next two summers)
generates significant welfare gains for the children and raises future tax revenues approximately
sufficient to pay for the cost of this schooling expansion.