A simple model of working from home

Mabel Andalon () and Matthew Jones ()
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Mabel Andalon: Productivity Commission
Matthew Jones: Productivity Commission

Australian Journal of Labour Economics (AJLE), 2022, vol. 25, issue 2, 193-214

Abstract: The paper describes a simple model of working from home. The model extends the standard consumption vs unpaid hours decision faced by individuals to make labour a location-specific good. We drew three main insights from the model: (1) increased access to working from home increases labour supply as some time saved from commuting is diverted to working hours; (2) the commute is a major cost which is borne entirely by the individual who supplies labour — this cost drives much of the welfare improvements that occur when working from home is permitted and; (3) paying a different wage to office vs home-based labour yields an efficient outcome. However, when wages cannot vary by location, firms and workers will likely make adjustments over time to make the distribution of work more efficient; such as by investing in home-based work technologies, or by developing processes to make distributed work more productive.

Keywords: Consumer Economics: Theory; Firm Behaviour: Theory Labour Demand and Supply (search for similar items in EconPapers)
JEL-codes: D11 D21 J2 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ozl:journl:v:25:y:2022:i:2:p:193-214

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