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A simple model of working from home

Author

Listed:
  • Mabel Andalon

    (Productivity Commission)

  • Matthew Jones

    (Productivity Commission)

Abstract

The paper describes a simple model of working from home. The model extends the standard consumption vs unpaid hours decision faced by individuals to make labour a location-specific good. We drew three main insights from the model: (1) increased access to working from home increases labour supply as some time saved from commuting is diverted to working hours; (2) the commute is a major cost which is borne entirely by the individual who supplies labour — this cost drives much of the welfare improvements that occur when working from home is permitted and; (3) paying a different wage to office vs home-based labour yields an efficient outcome. However, when wages cannot vary by location, firms and workers will likely make adjustments over time to make the distribution of work more efficient; such as by investing in home-based work technologies, or by developing processes to make distributed work more productive.

Suggested Citation

  • Mabel Andalon & Matthew Jones, 2022. "A simple model of working from home," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 25(2), pages 193-214.
    • Handle: RePEc:ozl:journl:v:25:y:2022:i:2:p:193-214
    as

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    References listed on IDEAS

    as
    1. Barrero, Jose Maria & Bloom, Nick & Davis, Steven J., 2020. "Why Working From Home Will Stick," SocArXiv wfdbe, Center for Open Science.
    2. Nicholas Bloom & James Liang & John Roberts & Zhichun Jenny Ying, 2015. "Does Working from Home Work? Evidence from a Chinese Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(1), pages 165-218.
    3. Alfred Michael Dockery & Sherry Bawa, 2014. "Is working from home good or bad work? Evidence from Australian employees," Bankwest Curtin Economics Centre Working Paper series WP1402, Bankwest Curtin Economics Centre (BCEC), Curtin Business School.
    4. Jensen, Nathan & Lyons, Elizabeth & Chebelyon, Eddy & Bras, Ronan Le & Gomes, Carla, 2020. "Conspicuous monitoring and remote work," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 489-511.
    5. James Lennox, 2020. "More working from home will change the shape and size of cities," Centre of Policy Studies/IMPACT Centre Working Papers g-306, Victoria University, Centre of Policy Studies/IMPACT Centre.
    6. Michael Gibbs & Friederike Mengel & Christoph Siemroth, 2023. "Work from Home and Productivity: Evidence from Personnel and Analytics Data on Information Technology Professionals," Journal of Political Economy Microeconomics, University of Chicago Press, vol. 1(1), pages 7-41.
    7. A.M. Dockery & Sherry Bawa, 2014. "Is Working from Home Good Work or Bad Work? Evidence from Australian Employees," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 17(2), pages 163-190.
    8. Groen, Bianca A.C. & van Triest, Sander P. & Coers, Michael & Wtenweerde, Neeke, 2018. "Managing flexible work arrangements: Teleworking and output controls," European Management Journal, Elsevier, vol. 36(6), pages 727-735.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Consumer Economics: Theory; Firm Behaviour: Theory Labour Demand and Supply;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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