The Zoom city: working from home, urban productivity and land use

Abstract

This article investigates the impact of working from home (WFH) on the emergence and structure of monocentric cities. In the long run, WFH raises urban productivity only in sufficiently large cities. Business land rents fall while residential land rents decrease near the business district. Workers have incentives to adopt inefficiently high WFH schemes. In the short run, WFH yields mixed benefits for commuters and firms, which corroborates the low WFH adoption before the pandemic. Advances in digital technology increase the welfare benefits of WFH. Calibration exercises on European capital cities shed light on the quantitative impact of WFH.