Effects of remote work on population distribution across cities: US evidence from a QSE model

This study investigates the impact of remote work adoption on the size and competitiveness of cities in the United States. As a contribution to the ongoing debate sparked by the Covid-19 pandemic, the research initially establishes city-specific upper-bound measures of potential remote work adoption, utilizing the share of employment in remotely-performable occupations for each city. Subsequently, it employs a Quantitative Spatial Economic model, incorporating shipping and commuting costs, to assess the counterfactual effects that these potential levels of remote work adoption would have on population distribution across US cities. Model predictions indicate that upon full remote-work adoption, only select highly productive cities would grow in size and productivity, tothe detriment of the majority of locations. Nevertheless, the emerging spatial equilibrium yields generalized welfare gains characterized by reduced markups in larger cities, extending even to shrinking cities through the pro-competitive effect of trade. The findings suggest a policy-relevant dual role of remote work, concurrently enhancing welfare while reinforcing agglomeration and inequality across cities.