Economics of

Education
PANDEMIC ECONOMICS
CHAPTER 10

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Topics
1. The Important Role of Schools
2. The Impact of a Pandemic on Education
3. Investment in Human Capital: A Model Framework
4. School Reopening
5. Educational Models During a Pandemic
6. Technology and Innovation

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Learning Objectives
After reading this chapter, you will be able to:
LO1 Consider the important role for schools in society during a pandemic.
LO2 Explain why pandemics complicate the educational experience.
LO3 Describe the model of investment in human capital.
LO4 Assess the costs and benefits of school reopening.
LO5 Evaluate different educational models during a pandemic.
LO6 Discuss technological advances and innovations in education.

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 •Apandemic highlights the value of
education.

1. The • When the educational process is

disrupted, families, schools, and
Important policymakers attempt to minimize social
Role of costs.

Schools • When a pandemic disrupts the

educational environment, teachers,
administrators, and policymakers
scramble to maintain quality education.

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 • During a pandemic, one of the first sets
2. The of institutions to close is schools.

Impact of a • The motivation for school closures is a

reduction in transmissions between
Pandemic on students.
Education • Nevertheless, the closure of schools
leads to economic and social costs.

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Tradeoff
• When students are not in school, the average number of daily
contacts is less than what would occur during regular school hours.
• A reduction in attendance reverberates throughout society,
impacting families, communities, and the economy.
• School closures must be weighed against:
• developmental losses for students
• less access to publicly-supported meals for low-income children
• the loss of “childcare” for working parents

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Policy Context
• School closings must be evaluated within the context of an overall shutdown
strategy.
• On the demand side, before schools reopen, students experience online
education.
• Students must have access to technology, including internet connections and
electronic devices, which varies according to socio-economic circumstances.
• On the supply side, before reopening, teachers must provide online education.
• The change from a full-time, in-person format to an online model creates
challenges: teachers must adapt content and deliver it using technology.

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Reopening and Disease Containment
• Schools eventually reopen.
• But for an effective movement back to traditional education, the
disease must be safely contained.
• Communities must evaluate the costs and benefits of school
reopening in the presence of both uncertainty and the prospect of
secondary infection waves.

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Lasting Effects
• Educational innovations during a pandemic may lead to lasting effects.

• Teachers may find that the provision of assignments in an online format leads to
efficiency gains.
• Students may find that online learning corresponds to the consumption of
technology in other aspects of their lives.
• Administrators may view the infusion of technology with traditional forms of
education as a new hybrid model.

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 • Educationand training play an important role in
3. the development of human capital, the ability of
a person to produce goods and services.
Investment • The higher the level of human capital, the more
in Human that individuals are able to contribute to the
economy.
Capital: A • Throughout the life cycle, individuals with
Model higher levels of education and training tend to
have higher incomes.
Framework •These individuals tend to work more, consume
more, and accumulate wealth at a faster rate.

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Optimal Investment Path
• Individualsmaximize the present value of their lifetime earnings by
allocating their time between work and activities that enhance their
human capital.
• That is, they choose an optimal expenditure path for educational
services.

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Technological Efficiency of Education
• The
ability to learn is the technological efficiency of education, a
function of both individual effort on the demand side and the
provision of educational resources on the supply side.
• As individual effort and the provision of educational resources rise,
the technological efficiency of education increases.
• Therefore, to the extent that families support students and
communities support schools, educational outcomes increase.

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External Benefits
• The presence of external benefits, benefits accruing to people other than the
consumers or producers, justify a substantial subsidy to public education.
• In the presence of external benefits, market allocation is too low from society’s
perspective.
• For every level of output, marginal private benefit (MPB), the additional
benefit to individuals from consuming another unit, is less than marginal social
benefit (MSB), the additional benefit to society.
• The supply curve equals marginal social cost (MSC), the additional cost to
society of supplying one more unit.

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Analyzing External Benefits
• At point c, the quantity of education demanded by students equals Qo, but a
lower price does not provide the incentive to provide more education.
• Therefore, in the presence of external benefits, government intervenes, and the
increase in net benefits of the movement from a to b is represented by area
abd.
• With external benefits, government may intervene with a corrective subsidy, a
payment to either sellers or buyers that reduces the price to buyers.
• By subsidizing education, government accounts for MEB.

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 • Of all
the institutions that close during the
shutdown interval of a pandemic, few face the
same pressure to reopen as schools.
4. Reopening • For students, a lack of consistent education may
Schools lead to developmental harm.
• Working parents, particularly mothers, worry
about having to leave the workforce if their
children cannot attend school.

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Criteria for Reopening Schools
• Safety guidelines accompany the process of reopening schools, including
testing, the rate of new infections, limited class size, mask-wearing, fresh air
circulation, and an incremental approach.
• The Harvard Global Health Institute proposed a benchmark for reopening
schools of fewer than 25 cases per 100,000 people in the community.
• The World Health Organization proposed a benchmark of a positivity rate of less
than 5 percent of all those who are tested over a two-week period.

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Education Gap
• A focus on safety guidelines may reopen schools faster than an alternative but
may also widen the education gap if wealthier school districts reopen before
others.
• Education gap: the disparities in performance among different socioeconomic
groups.
• Students without steady tutoring or internet access fall behind their higher-
income counterparts.

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 BENEFITS OF REOPENING SCHOOLS COSTS OF REOPENING SCHOOLS

 Effectiveness of in-person classes  Potential spread of the disease among

 Positive functions of schools members of the educational community
 Safety from disease and mitigation of risk  An increase in the reproduction number

 Childcare  Logistical and economic challenges

 Meeting mental health needs of students

 Adaptive learning opportunities

 Blended learning approaches

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 5. • During
the shutdown interval in a
Educational pandemic, students shelter-in-place.

Models • To continue to provide an educational

service, schools switch to alternative
During a methods of instruction, including online
Pandemic education.

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Level of Education
• The impact of a pandemic on education depends on the level under
consideration, primary, secondary, or higher education.
• First, the degree of infectiousness may differ according to age group.
• Second, education at different levels creates unique challenges and
opportunities.
• Third, education for younger and older students requires different levels of
oversight.

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Primary Education
• Primary education refers to elementary school.
• In areas where the disease is under control, an in-class experience is
most important for younger children.
• Elementary school students are the least equipped to learn from
online education.

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Secondary Education
• Secondary education refers to middle school and high school.

• At this level, the students have a greater potential to learn with online
education.
• Organized and motivated students may use this learning environment to
complete their school requirements while creating additional opportunities,
including projects and activities.

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Higher Education
• Higher education refers to the college and university experience.
• When the disease spreads, institutions of higher education may
choose to close.
• When they reopen, they must deal with the potential of secondary
waves.

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Coordination Problem
• If institutions shut down and lose revenue from tuition, fees, and room and
board, they may eliminate programs, lay off faculty, and lose their position in the
educational hierarchy.
• These outcomes create a coordination problem among schools.
• As a result, coordinated responses serve as a logical decision from an
economics perspective as the schools may act in concert while not exposing
students to public health risks.

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Winner-take-all Markets
• With higher education, a pandemic creates the conditions for winner-take-all
markets.
• In these markets, the best economic performers capture the largest share of
market rewards while other competitors are left with less.
• These outcomes widen economic disparities because a few agents are able to
increase the amount of income that would otherwise flow to market suppliers in
a more equitable manner.
• This example applies to the university environment but not primary and
secondary schools.

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Positive Feedback Effects
• A feature of a winner-take-all markets is positive-feedback effects that create net
benefits for suppliers.
• With academic instruction, a movement toward a greater level of remote learning
occurs slowly, fueled by the need of universities to proceed in a cost-effective
manner.
• A pandemic amplifies this process, accelerating the transition to remote learning.
• Although the supply of online instruction may be low before a pandemic, an
increase in supply accelerates efficient delivery methods.
• Over time, remote courses compete for approval and students designate some as
superior.

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Economies of Scale
• In this context, economies of scale serve as a driving force, meaning the cost
savings from an increase in production.
• Most of the costs of supplying online courses are fixed.
• When the number of online students increases, costs per student decline.
• The cost of creating a lecture for an online platform is the same whether a few
students or many students watch it.

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Educational Models
• During a pandemic, the provision of education differs according to
circumstance.
• Three alternative models exist:
• Online education
• Hybrid education
• Safe centers for online learning

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Online Education
• With online education, teachers provide the educational experience to students
in remote locations.
• They interact with videoconferencing technology.
• Assignments are posted to internet sites.
• Teachers mark the assignments remotely, providing feedback when
appropriate.

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Hybrid Education
• The hybrid model combines face-to-face learning with online instruction.
• The idea is to engage students but reduce complexity.
• New assignments, information, and student exploration may occur remotely
while the instruction of new concepts and feedback may occur in person.

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Safe Centers for Online Learning
• This model includes online instruction and space in school.

• The idea is to provide online education but create a supervised environment.

• The school serves as a voluntary resource center as opposed to a compulsory
attendance requirement.

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Double Shifts
• During a pandemic, changes in the supply of and demand for educational
services depends on the type of education, either traditional or online.
• Because students shelter-in-place during the shutdown interval, the supply of
and demand for traditional education decreases.
• But the supply of and demand for online education increases.
• The outcome is a double shift when both supply and demand shift.

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 • The dynamic between the pandemic, economy, and
education challenges society, including the risk of bringing
students together before disease eradication, establishing
the learning process during online education, and
6. determining the optimal time for reopening.

Technology • But a pandemic also provides an opportunity to use the

educational environment as a laboratory.

and • A pandemic changes the reality of face-to-face learning.

Innovation • Several examples of innovation exist, including apps for

health, wastewater testing, and powered-up schools.
• While the purpose of these procedures is innovation,
experiments in an educational setting provide examples
for society at large.

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