Work-from-home and cities: An elementary spatial model

Abstract

This paper analyzes the urban impacts of hybrid WFH in the simplest possible model, relying on Leontief utility and production functions and other simplifying assumptions. The analysis shows that introduction of WFH raises both the wage and household land consumption (raising worker utility) while shrinking the size of the business district and reducing business land rent. When WFH requires home work space, the city’s overall spatial size increases, with residential rents rising in the suburbs while falling near the center. The decline in business rent and the rotation of the residential rent contour match empirical evidence showing that WFH reduces office-building values and flattens the residential rent gradient.