Returning to the City Center: The spread of teleworking and urban structure

How does telecommuting affect urban structure? This paper presents a new economic geography (NEG) model with inter-regional commuting. In a two-region model, workers choose their regions of residence and workplaces. Residing outside of the working region increases commuting costs, but reduces housing costs. The widespread use of telework reduces inter-regional commuting costs, which disperses the distribution of residents and promotes the concentration of employment. Such a change in labor distribution can improve social welfare. Applying the model to the Urban Employment Areas in Japan, the following simulation analysis is conducted. First, the values of commuting and transportation costs are calibrated to explain the actual distribution of workers and employment between core and suburban regions. Then, the impact on urban structure of lower commuting costs due to the widespread use of telework is simulated. In addition, the impact of changes in productivity due to the introduction of telework is also examined.