Working Paper: CEPR ID: DP17672
Authors: Toshitaka Gokan; Sergey Kichko; Jesse Matheson; Jacques-Francois Thisse
Abstract: In recent years the land-rent gradient for the city of London has flattened by 17 percentage points. Further, teleworking has increased 24 percentage point for skilled workers, but much less for unskilled workers. To rationalize these stylized facts, we propose a model of the monocentric city with heterogeneous workers and teleworking. Skilled workers, working in final goods production, can telework while unskilled workers, working in either final goods or local services production, cannot. We show that increased teleworking flattens the land-rent gradient, and eventually skilled workers move from the city center to the city’s periphery, fundamentally changing the city structure. The increased teleworking has implications for unskilled workers who move from the local services sector into final goods, leading to greater wage inequality between skilled and unskilled workers. The model is extended to two cities which differ in productivity. Teleworking allows skilled workers of the more productive city to reside in the less productive city where housing is cheaper. This increases housing prices in the less productive city, relative to the more productive city, and has implications for unskilled workers in both cities. We provide empirical evidence from housing prices in England which is consistent with this result.
Keywords: Working from home; Telecommuting; Gentrified cities; Doughnut cities; Intercity commuting
JEL Codes: J60; R00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased teleworking (J29) | flattening of the land rent gradient (R31) |
| flattening of the land rent gradient (R31) | movement of skilled workers to the periphery of cities (J61) |
| movement of skilled workers to the periphery of cities (J61) | decline in demand for local consumption services (LCS) in the city center (R22) |
| decline in demand for local consumption services (LCS) in the city center (R22) | unskilled workers transition from LCS sector into final goods production (F66) |
| unskilled workers transition from LCS sector into final goods production (F66) | greater wage inequality between skilled and unskilled workers (F66) |
| increased teleworking (J29) | structural shift in residential demand towards less productive, more affordable cities (R23) |
| movement of skilled workers from more productive cities to less productive areas (J61) | increase in housing prices in less productive areas (R31) |