How the rise of teleworking will reshape labor markets and cities?

M otivated by empirical evidence, we propose a model of the monocentric city with he terogeneous workers and teleworking. We show that increased teleworking flattens t he land-rent gradient and eventually moves skilled workers from the city center to the c ity’s periphery. Unskilled workers move from the local services sector into final goods and wage inequality between skilled and unskilled workers increases. Extending t he model to two cities, teleworking increases housing prices in the less productive city r elative to the more productive city, with implications for unskilled workers in both c ities. Empirical evidence from housing prices in England are consistent with this r esult.