Telecommuting and urban sprawl

This study examines what happens to city size when telecommuting occurs. It assumes that more telecommuting occurs when telecommuters' labor cost share increases and/or workers adopt a more favorable attitude toward working from home. The study shows that telecommuting produces opposing forces that regulate the city size, one centralizing and the other decentralizing urban activities. These forces are examined in a city where workers and firms are given the option to freely mix working at the office and at home, and the city's land use is endogenously determined. A rise in the productivity of an economy due to telecommunications technology could work to centralize urban activities, while urban contraction can occur with a fixed city population.