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How the Rise of Teleworking Will Reshape Labor Markets and Cities

Author

Listed:
  • Toshitaka Gokan
  • Sergei Kichko
  • Jesse A. Matheson
  • Jacques-Francois Thisse
Abstract
Since 2020, London experienced a 400% increase in teleworking among skilled workers. We propose a model that studies the implications of teleworking on (i) the residential structure of cities, (ii) the wage structure between skilled and unskilled workers, and (iii) the provision of local services in central and residential areas. Increased teleworking reduces the willingness to pay for residential proximity to the city center, and thus induces the residential movement of skilled workers towards the suburbs. The magnitude of this structural change, and its effect on labor markets and skilled/unskilled wage inequality, depends on the desirability of local services available in central and residential areas. In a two-city extension, teleworking moves skilled workers from the productive (and expensive) city to the less productive city. This has implications for residential structure and individual welfare in both cities. We find empirical evidence on changes in retail and hospitality footfall, skilled wage premium, and location changes for local services businesses in England consistent with the model’s predictions.

Suggested Citation

  • Toshitaka Gokan & Sergei Kichko & Jesse A. Matheson & Jacques-Francois Thisse, 2022. "How the Rise of Teleworking Will Reshape Labor Markets and Cities," CESifo Working Paper Series 9952, CESifo.
    • Handle: RePEc:ces:ceswps:_9952
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    Cited by:

    1. Behrens, Kristian & Kichko, Sergei & Thisse, Jacques-Francois, 2024. "Working from home: Too much of a good thing?," Regional Science and Urban Economics, Elsevier, vol. 105(C).
    2. Roberto Camagni & Roberta Capello & Camilla Lenzi & Giovanni Perucca, 2023. "Urban crisis vs. urban success in the era of 4.0 technologies: Baumol's model revisited," Papers in Regional Science, Wiley Blackwell, vol. 102(3), pages 589-612, June.
    3. Gilles Duranton & Jessie Handbury, 2023. "COVID and Cities, Thus Far," Economic Policy Review, Federal Reserve Bank of New York, vol. 29(2), pages 6-52, October.
    4. Stijn Van Nieuwerburgh, 2023. "The remote work revolution: Impact on real estate values and the urban environment: 2023 AREUEA Presidential Address," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(1), pages 7-48, January.

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    More about this item

    Keywords

    telecommuting; working from home; local labor markets; local consumer services; gentrified cities; inter-city commuting;
    All these keywords.

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General

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