Free DP Download 21 January 2021 - THE ECONOMIC IMPLICATIONS OF WORKING FROM HOME: Too much of a good thing?

Thursday, January 21, 2021

Kristian Behrens, Sergey Kichko, Jacques-François Thisse 
CEPR DP No. 15669 January 2021

Working From Home (WFH) has several desirable effects, e.g., the reduction of congestion and pollutant emissions associated with intensive and long commuting, however, new evidence suggests that WFH is not the universal panacea, largely since an excessive downscaling of workspaces may be damaging to all and exacerbate economic inequality. 

These are among the findings of a new CEPR study by Kristian Behrens, Sergey Kichko and Jacques-François Thisse, which examines how different intensities of telecommuting affect the efficiency of firms that embrace home working, as well as its impact on the whole economy. Among the findings: 

  • It is profit-maximizing for firms to implement a partial WFH strategy, that is, the working time is split between home and office.
  • Telecommuting rates should keep rising with the development of increasingly efficient communication technologies.
  • A significant extension of telework will affect market prices in ways that are not always easy to predict. 
  • Looking only at the short-run performance of teleworking firms to predict the global impact of WFH will provide a fairly incomplete picture of how the economy will be transformed.
  • Raising the WFH share has, first, a positive and, then, a negative impact on incomes and GDP.
  • WFH is a mixed blessing: the relationship between telecommuting and productivity or GDP is inverted-U shaped, whereas telecommuting raises income inequality.

Widespread telecommuting has increased dramatically since Covid-19, and may become a permanent feature of the economic landscape, the long-term consequences are still unclear. 


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