The Fiscal and Welfare Effects of Policy Responses to the Covid-19 School Closures

Abstract:

Based on data on school visits from Safegraph and on school closures from Burbio, we document that during the Covid-19 crisis secondary schools were closed for in-person learning for longer periods than elementary schools, private schools experienced shorter closures than public schools, and schools in poorer US counties experienced shorter school closures. To quantify the long-run consequences of these school closures, we extend the structural life cycle model of private and public schooling investments by Fuchs-Schündeln et al. (Econ J 132:1647-1683, 2022) to include private school choice and feed into the model the school closure measures from our empirical analysis. 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 0.5 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 1/4. A policy intervention that extends schools by 6 weeks generates significant welfare gains for children and raises future tax revenues sufficient to pay for the cost of this schooling expansion.