Quantifying The Macroeconomic Impact of Covid-19-Related School Closures on Human Capital

By Christine de La Maisonneuve, Economist, Balázs Égert, Senior Economist Organisation for Economic Co-Operation and Development, Dave Turner, Head, Macroeconomic Analysis Division Organisation for Economic Co-Operation and Development. Originally published at VoxEU.

The COVID-19 pandemic led to the partial or full closure of schools in almost all countries around the world. On average, across OECD countries, school buildings were fully closed for 13 weeks and partially closed for a further 24 weeks between March 2020 and October 2021, which combined is equivalent to around one full school year. [1]. Learning losses stemming from school closure may be difficult to make up and so may have a long-term economic impact on the students affected, with possible enduring macroeconomic consequences (Ilzetzki 2020, Kuhn et al. 2020, Popova et al. 2020).

Figure 1 Duration of school closures between March 2020 and October 2021

Note: Full school closures refer to situations where all schools were closed nationwide due to COVID-19. Partial school closures refer to school closures in some regions or for some grades, or with reduced in-person instruction. Total closures are defined as the simple unweighted sum of these two aggregates.
Source: UNESCO.

We exploit a new measure of human capital, derived in Égert et al. (2022), that combines mean years of schooling (MYS) and OECD data from the Programme for International Student Assessment (PISA). The new measure is a cohort-weighted average of past PISA scores (representing the quality of education) of the working-age population and the corresponding mean years of schooling (representing the quantity of education). Weights for PISA scores and mean years of schooling are estimated from regressions which consider how well the cohort-weighted variables explain scores from the Programme of International Assessment of Adult Competencies (PIACC).

Based on this new measure, we can compute separately the effect of the pandemic on PISA scores and mean years of schooling (MYS) and feed this into the stock measure of human capital. For each cohort impacted, we add up the effects of the pandemic on MYS and PISA test scores to estimate the overall effect on human capital. We calculate these using the elasticities of MYS and PISA with respect to human capital, estimated in Égert et al. (2022). We then calculate a population-weighted average of the impact of each cohort affected to provide the global effect on human capital.

The new measure of human capital shows a robust correlation with productivity for OECD countries in cross-country time-series panel regressions. This helps us quantify the macroeconomic losses due to school closures, reflected in losses in PISA scores and mean years of schooling.

Using these estimates, we consider three scenarios:

  • The effect of the spring 2020 school closures experienced in many OECD countries, which roughly corresponded to one-third of a school year closure. This period of closure translates into a -2.6% decrease in mean years of schooling[2] and, using the rule-of-thumb described above, a 0.14 standard deviation fall in PISA scores[3],corresponding to a 1.1% decrease in PISA scores.[4]
  • The effect of a one-year school closure, broadly corresponding to the average total (full and partial) school closures observed across OECD countries since the start of the pandemic and, according to a first assessment, to the learning loss of the most disadvantaged students in the US (US Department of Education, 2022). This scenario translates into a -8.2% decrease in MYS and a -0.37 standard deviation fall in PISA scores, corresponding to a 2.9% decrease in PISA scores.
  • The effect of a two-year school closure, which occurred only rarely and broadly corresponding to the total (full and partial) school closure in Colombia, Chile, Korea, and Mexico since the start of the pandemic which translates into a -16.5% decrease in MYS and a 5.6% and a -0.72 standard deviation fall in PISA scores

We estimate the impact of school closures on productivity through the human capital effect for these three scenarios. Multivariate productivity regressions link productivity to human capital in the presence of a number of control variables such as innovation intensity, product market regulation and trade openness. The impact will increase gradually as the student cohorts hit by the pandemic enter the labour force, reaching its peak in 2067. At that date, the impact of school closures on productivity will be -0.4%, -1.1% and -2.1% in the first, second and third scenarios, respectively. The impact will then dissipate gradually until the last impacted cohort retires in 2083 (Figure 2). The impact is largest in 2067, as this is when all the impacted cohorts will be in the older part of the labour force, and the impact on human capital is most important.

Figure 2 The impact of school closure on productivity

Source: Authors’ calculations.

Comparison with Estimates in the Existing Literature

The empirical findings of the literature standardised to a one-year school closure imply a non-negligible impact of the crisis on the level of GDP ranging from -1.1% to -4.7% around 2040-2050 (Dorn et al. 2020, Hanushek and Woessmann 2020, and Viana Costa et al. 2021). Researchers have used different methodologies. Dom et al. (2020) set up various scenarios to produce back-of-the-envelope calculations. Viana Costa et al. (2021) derive the economic costs using microsimulation model calculations. The calculations of Hanushek and Woessmann (2020) use macro regression analysis, which links GDP per capita to student test scores in a multi-country error-correction framework. Our results are broadly consistent with much of the literature except for Hanushek and Woessmann (2020), who found a much larger effect (-4.7%). Those results would be equivalent, ceteris paribus, for effect on GDP per capita.

Mitigation Policies

Mitigating the COVID-19 impact on human capital is a major policy challenge because most, if not all, education policy reforms have long implementation lags, implying that education policies mitigating the pandemic’s effect will not be able to reach the oldest student cohorts affected by COVID-19. An additional difficulty is that some policies concern the youngest students. Measures that could be implemented to help the catch up of affected student generations include the following (OECD 2020, OECD-Education International 2021, and Molato-Gayares et al. 2022):

  • Extending the teaching time by temporarily reducing school holidays and/or adding hours in a school day.
  • Revising the curriculum to focus on key skills.
  • Providing teachers with training.
  • Considering the use of digital technologies to improve the diagnosis of learning gaps and facilitate more individualised teaching practices
  • Spreading collaboration and professional ways of working to increase teachers’ effectiveness

For the cohorts that have already left school, it is important to strengthen young adult training programmes. However, these are notoriously not very cost-effective, and offsetting losses in learning at younger ages can turn out to be very costly for the government budget.

Further measures could include extending and improving the quality of pre-school education, considered by many as the best value for money, which would come too late for almost all student cohorts affected by the pandemic. Other education policy reforms, which are found to have a positive correlation with student test scores during normal times, but which might also help offset some of the losses for the younger generations in the aftermath of the pandemic, include increased school accountability and school autonomy, reduced early tracking and improved teacher quality and qualifications.

[1] These average numbers hide large disparities across countries. While schools in Switzerland and Iceland were closed less than ten weeks, school closures in Korea, Chile and Colombia lasted nearly one and a half years (Figure 1). It is assumed that a full school year is 38 weeks.

[2] The percentage loss in MYS is calculated as the loss in schooling expressed in school years divided by the average MYS for the entire labour force. For example, for a loss of 0.32 school years assuming an average MYS for the entire labour force of 12 years implies a loss in MYS for that cohort of 2.6% (=0.32/12 x 100%).

[3] For 12 weeks, the fall in PISA score is equivalent to 0.14 (12*0.012) standard deviation; for one year, it is 0.37 (12*0.012+(38-12)*0.009) standard deviation and for two years it is 0.72 (12*0.012+(76-12)*0.009) standard deviation.

[4] Percentage loss in PISA = (Estimated impact * PISA standard deviation)/Base PISA score = (-.14 * 36.1)/462.

References available at the original.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

18 comments

  1. Wyatt Powell

    The impacts on human “capital” will be far worse from mass deaths than from any loss of indoctri… Err, I mean education.

    Reply
    1. John R Moffett

      The use of the term human capital is crude and offensive. I agree that modern education seem a bit more like indoctrination than anything else. Education in the west has gone downhill for most of my lifetime. Now it seems like the object is to make functional worker bees, and skip things like critical thinking, or the actual brutal history of western countries (so that we might be able to learn from past mistakes).

      If they really want to improve education, change the curriculum. Bring back real history, philosophy, critical thinking skills and I would add courses on how to spot propaganda and misleading advertising. But that isn’t going to happen.

      Reply
        1. Old Ghost

          “Functional worker bees….,”

          LOL. LOL, In the USA that was always the goal of free public schools.

          And when you think about it, a successful society is one that reproduces itself.

          Reply
      1. Lambert Strether Post author

        > The use of the term human capital is crude and offensive.

        On the one hand, capital is inhuman, so yes. On the other, capital is a social relation, so no (or yes, depending on your view of the relation). People reducing themselves to inhumanity is what capital is all about! Not that anybody will say this.

        Reply
  2. Ghost in the Machine

    Any system that refers to humans as “capital” or “resources” (or even consumers instead of citizens) is a system with the wrong (evil?) perspective. It will fail.

    Reply
    1. ArvidMartensen

      No, looking at how language is being used show the push by capitalists to dehumanise human beings is winning.
      Back in the day, we were taught that you use ‘who’ for human beings who are more important than inanimate objects for which you used ‘which’ and ‘that’. So today we have the media writing about companies ‘who’ are doing things. And people ‘that’ are doing things.
      People no longer realise they are people and companies are things, and have now swallowed, it seems, the idea that they are objects and companies are real living entities to be treated with respect.
      I assume that all AI will be referred to as ‘who’ very soon. eg “our HR chatboot, who is being distressed by irate ex-staff that complain they weren’t paid their final wages, is now authorised to terminate these unproductive exchanges.”

      Reply
  3. Basil Pesto

    Heh, as it happens just a little earlier Pat Blanchfield had a couple of great tweets on the learning loss/kids-as-human capital nexus:

    1/ its very cool how the discourse of “learning loss” fundamentally refers to shortfalls in the metrics we impose on young people as they develop into human capital rather than, say, what they could have learned from caregivers and community members who unnecessarily died

    2/ did the kids lose human connections, or experience trauma? whose to say really but hey maybe they actually did learn a great deal about how cheap human life is under capitalism and how little we actually think of them beyond their grades, test scores, and capacity to bear debt

    Reply
    1. t

      They didn’t list masking, ventilation, testing, and tracking as strategies, just more school and more teacher training.

      Reply
      1. Rip Van Winkle

        A distant family member owns a HVAC cleaning business specializing commercial /industrial/ institutional customers in a large older metro area.

        Because of the interest due to COVID concerns some of his first-time customers are finding out about rats and rat droppings they’ve had in the systems all along.

        Reply
  4. cnchal

    Other education policy reforms, which are found to have a positive correlation with student test scores during normal times, but which might also help offset some of the losses for the younger generations in the aftermath of the pandemic, include increased school accountability and school autonomy, reduced early tracking and improved teacher quality and qualifications.

    That isn’t an ‘and’ thing, its an ‘or’ thing. The whole article seems to be written by chatGPT.

    reduced early tracking = don’t look now

    improved teacher quality and qualifications = moar bullshit jawbs

    stock of human capital = we are nothing moar than “electrified bags of protoplasm” to the toe suckers of the Grey Poupon class.

    Reply
  5. Willie

    Wouldn’t it be preferable instead to promote a child’s capability to enhance a nation’s common prosperity than submit to an extortion plot ensconced in a zero-sum game?

    Words are dangerous, it seems.

    Reply
  6. JBird4049

    Isn’t true that at least some of the PMC parents like Rochelle Walensky are increasing air filtration and flow to protect their children while at school, while stopping that for their lessers’ children; aren’t healthcare, broadband, and good computer tech all much more available for the former? Then there are the breakfast and lunch programs for low income children.

    Really, while the school closures have affected everyone and their children, I think that the upper middle class on up are basically doing okay, while the middle on down are greatly harmed both in the loss of learning and socializing with other people as well as the greater danger from Covid. Perhaps, another form of eugenically weighted dice?

    Reply
    1. MGibbins

      Blair Fix has noted the affinity between human capital theory and eugenics.
      The rise of human capital theory
      Abstract
      Today, human capital theory dominates the study of personal income. But this has not
      always been so. In this essay, I chart the rise of human capital theory, and compare it
      to the rise (and fall) of eugenics. The comparison, I argue, is an apt one. Eugenics
      and human capital theory both focus on isolated traits of individuals. By doing so, both
      theories neglect the social nature of human behavior.

      Reply

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