How Do Cities Change When We Work from Home?

43 Pages Posted: 14 Dec 2020

See all articles by Matt Delventhal

Matt Delventhal

Claremont McKenna College - Robert Day School of Economics and Finance

Eunjee Kwon

University of Southern California, Department of Economics, Students

Andrii Parkhomenko

University of Southern California - Marshall School of Business

Date Written: December 4, 2020

Abstract

How would the shape of our cities change if there were a permanent increase in working from home? We study this question using a quantitative model of the Los Angeles metropolitan area featuring local agglomeration externalities and endogenous traffic congestion. We find three important effects: (1) Jobs move to the core of the city, while residents move to the periphery. (2) Traffic congestion eases and travel times drop. (3) Average real estate prices fall, with declines in core locations and increases in the periphery. Workers who are able to switch to telecommuting enjoy large welfare gains by saving commute time and moving to more affordable neighborhoods. Workers who continue to work on-site enjoy modest welfare gains due to lower commute times, improved access to jobs, and the fall in average real estate prices.

Keywords: COVID-19, urban, work at home, commuting

JEL Classification: E24, J81, R31, R33, R41

Suggested Citation

Delventhal, Matt and Kwon, Eunjee and Parkhomenko, Andrii, How Do Cities Change When We Work from Home? (December 4, 2020). Available at SSRN: https://ssrn.com/abstract=3746549 or http://dx.doi.org/10.2139/ssrn.3746549

Matt Delventhal

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States

Eunjee Kwon

University of Southern California, Department of Economics, Students ( email )

Los Angeles, CA
United States

Andrii Parkhomenko (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd, HOH 431
Los Angeles, CA California 90089-1424
United States

HOME PAGE: http://www.andrii-parkhomenko.net/

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