Productivity dynamics of work from home: Firm-level evidence from Japan

Abstract

This study documents the changes in work from home (WFH) practices since the onset of the COVID-19 pandemic using panel data from original firm surveys in Japan. Particular attention has been given to the productivity dynamics of WFH. The results indicate the following: First, compared to when the first state of emergency was declared in the spring of 2020, at the end of 2021, the ratio of firms utilizing WFH and the intensity of WFH decreased substantially. Second, according to the firms’ evaluations, the mean productivity of WFH improved by more than 10 percentage points, although it was still approximately 20% lower than that of conventional workplaces. The selection effect arising from the exit from this practice among firms with low WFH productivity, and the improvement in productivity among WFH-continuing firms contributed almost equally to the average productivity growth. Third, the majority of firms are planning to discontinue WFH practices and revert to the conventional work style or to reduce WFH intensity after the end of COVID-19, and the gap between firms’ plans and the desire of remote workers is widening.