Shifting to Telework and Firms' Location: Does Telework Make Our Society Efficient?

TL;DR

This paper develops a theoretical model to analyze how increased telework influences firm locations and urban efficiency, showing that teleworking leads to more centralized or fringe-based firm locations and enhances city compactness.

Contribution

It introduces a unified theoretical framework that explains empirical findings on telework's impact on urban structure and efficiency, bridging simulation results with analytical insights.

Findings

Firms tend to locate closer to urban centers or fringes with more telework

Teleworking increases urban production efficiency

Cities become more compact due to telework adoption

Abstract

Although it has been suggested that the shift from on-site work to telework will change the city structure, the mechanism of this change is not clear. This study clarifies how the location of firms changes when the cost of teleworking decreases and how this affects the urban economy. The two main results obtained are as follows. (i) The expansion of teleworking causes firms to be located closer to urban centers or closer to urban fringes. (ii) Teleworking makes urban production more efficient and cities more compact. This is the first paper to show that two empirical studies can be represented in a unified theoretical model and that existing studies obtained by simulation can be explained analytically.