Discussion Papers

No.868 How the rise of teleworking will reshape labor markets and cities?

by Toshitaka Gokan, Sergei Kichko, Jesse A. Matheson, Jacques-François Thisse

October 2022


Motivated by empirical evidence, we propose a model of the monocentric city with heterogeneous workers and teleworking. We show that increased teleworking flattens the land-rent gradient and eventually moves skilled workers from the city center to the city’s periphery. Unskilled workers move from the local services sector into final goods and wage inequality between skilled and unskilled workers increases. Extending the model to two cities, teleworking increases housing prices in the less productive city relative to the more productive city, with implications for unskilled workers in both cities. Empirical evidence from housing prices in England are consistent with this result.

Keywords: telecommuting, working from home, gentrified cities, doughnut cities,
inter-city commuting

JEL classification: J60, R00

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