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More working from home will change the shape and size of cities

James Lennox

Centre of Policy Studies/IMPACT Centre Working Papers from Victoria University, Centre of Policy Studies/IMPACT Centre

Abstract: Experiences of and investments in working from home (WFH) during the COVID-19 pandemic may permanently alter commuting behaviour and employment practices, ultimately changing the shape and size of cities. Using a spatial computable general equilibrium (SCGE) model, we study the effects of a shift to working-from home on labour supply, housing demands and the sectoral and spatial structure of the Australian economy. The model accounts for households' choices of occupations, residence and work locations, and for trade and input-output linkages between firms in different locations and industries. Simulating increased WFH in selected occupations causes labour supply to shift towards these occupations at the expense of others. This is particularly favourable for many business services industries, which use the WFH occupations most intensively. Within cities, workers choosing WFH occupations opt for longer, but less frequent commutes from residential locations that are more attractive or have cheaper housing. Although this depresses house prices in inner areas, attracting workers choosing non-WFH occupations and non-working households, the net effects are flatter residential density gradients and increased urban sprawl. Jobs, become more centralised within cities and increase overall in the largest and most productive cities. Smaller cities and towns close to large employment centres attract more residents who commute out, but the majority of Australian cities and towns shrink, relative to the baseline.

Keywords: commuting; working; from; home; telecommuting; SCGE; model; COVID-19 (search for similar items in EconPapers)
JEL-codes: C68 R12 R13 R41 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-geo, nep-lma and nep-ure
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