JUE Insight: How do cities change when we work from home?

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.

Automated summary

If there were a permanent increase in working from home, the shape of our cities would change. Jobs would move to the city core while residents would move to the outskirts. Traffic congestion would ease and travel times would decrease. Real estate prices would fall, with decreases in core locations and increases in the periphery. Workers who switch to telecommuting would enjoy significant welfare gains, saving commute time and moving to more affordable neighborhoods. Workers who continue to work on-site would also experience modest welfare gains, benefiting from shorter commute times, improved job access, and lower real estate prices.