Working Paper: NBER ID: w29181
Authors: Lukas Althoff; Fabian Eckert; Sharat Ganapati; Conor Walsh
Abstract: Big city economies specialize in business service industries whose workers’ local spending in turn supports a large local consumer service industry. Business service jobs have a high remote work potential. If remote work becomes more prevalent, many business service workers may leave expensive cities and work from elsewhere withdrawing spending from the local non-tradable service industries dependent on their demand. We use the recent COVID-19-induced increase in remote work to test for the strength of this mechanism and find it to be strong. As a result, low-skill service workers in big cities bore most of the pandemic’s economic impact. Our findings have broader implications for the distributional consequences of the US economy’s transition to more remote work.
Keywords: remote work; business services; consumer services; COVID-19; urban economics
JEL Codes: O33; R11; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| remote work (J62) | relocation of business service workers (J62) |
| relocation of business service workers (J62) | decline in consumer service spending (D12) |
| remote work (J62) | outflow of business service workers (J68) |
| outflow of business service workers (J68) | decline in local demand for consumer services (R22) |
| remote work (J62) | decline in hours for consumer service workers in big cities (J29) |