Employment shocks caused by firm closures and mass layoffs can lead to lower economic mobility within and across generations. Studies have found that workers who are displaced by unexpected firm closures experience significant and long-lasting reductions in earnings.<sup>24</sup> The long-term impacts of unexpected job loss can extend beyond the effect on one’s own income to the eventual labor market outcomes of offspring, reducing intergenerational mobility. Oreopoulos et al (2008), using Canadian data that follows more than 39,000 father-son pairs from 1978 to 1999, find that sons with fathers whose jobs were displaced by firm closures have significantly lower earnings than similar individuals whose fathers did not experience an employment shock, with the effects driven by families in the bottom quartile of the income distribution.<sup>25</sup> These effects are probably due to the impact of permanent reductions in family income caused by employment shocks on human capital development of children, with other non-monetary costs (such as stress in families) of unexpected job losses likely playing a role as well.

Second, large income losses often compel households to use coping mechanisms with potential longer-run impacts on nutrition, indebtedness, and at times, (the loss of) productive assts. As described in Section 4, the size of the shock and lack of adequate income-replacement programs led to many households, particularly the poor and the vulnerable, to adopt such strategies. Reducing consumption could increase nutritional deprivation for children and mothers, with damaging long-term consequences. High rates of indebtedness can lead to poverty traps, as the poor often pay higher interest rates for emergency loans than do better off households. The sale of productive assets to cope with shocks can be highly damaging when it is adopted, as it can adversely affect a household’s income-generating potential and ability to cope with future shocks.

Third, disruptions to schooling can widen learning gaps between children from different socioeconomic strata, reducing intergenerational mobility. In most low-income countries covered by HFPS, children in fewer than 66 percent of households participated in any continued learning when the schools were closed. Learning losses can have irreversible long-term costs for individuals and society alike. Evidence from past disasters suggests that disrupted schooling and the trauma of shocks can adversely affect learning among children that are observable years later.<sup>26</sup> These effects increase educational inequality, as suggested by early data from high-income countries (Belgium and the Netherlands). As children learn from home, social inequalities become more salient. To compound this effect, as vulnerable households in developing countries suffer income losses, some may also be less likely to send children back to school after a long period of closure. The closure of schools could thus widen already existing gaps in education between children born into different socioeconomic strata.

Fourth, long-term effects on inequality can also occur due to the interruption of critical health services caused by the pandemic, including maternal and child health care, which can leave lasting impacts on the health of future generations from vulnerable families. Elston et al (2017) find that in areas affected by the 2014–15 Ebola outbreak in West Africa, maternal and delivery care, malaria admissions for children under the age of 5, and vaccination coverage fell significantly. Such disruptions to health care, as well as to nutrition, could undo decades of gains in health outcomes in many low- and middle-income countries.

> 24 Jacobson, LaLonde, and Sullivan (1993) and Stevens (1997). They argue that firm closings can be thought of as exogenous employment shocks after conditioning on pre-displacement earnings.

> 25 The adult earnings of men whose fathers were displaced from their jobs due to firm closures are estimated to be 9 percent lower than earnings of similar individuals whose fathers did not experience an employment shock, after accounting for fathers’ pre-displacement earnings, initial region of work, industry, and firm size (Oreopoulos et al, 2008).

> 26 See, for example, Andrabi et al (2020), who finds significant impacts of an earthquake in Pakistan on children’s learning outcomes four years later.

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