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The City Paradox: Skilled Services and Remote Work

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Abstract

Large cities in the US are the most expensive places to live. Paradoxically, this cost is paid disproportionately by workers who could work remotely, and live anywhere. The greater potential for remote work in large cities is mostly accounted for by their specialization in skill- and information-intensive service industries. We highlight that this specialization makes these cities vulnerable to remote work shocks. When high-skill workers begin to work from home or leave the city altogether, they withdraw spending from local consumer service industries that rely heavily on their demand. As a result, low-skill service workers in big cities bore most of the recent pandemic’s economic impact.

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  • , 2020. "The City Paradox: Skilled Services and Remote Work," Opportunity and Inclusive Growth Institute Working Papers 43, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmoi:89240
    DOI: 10.21034/iwp.43
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    Cited by:

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    2. Shauna Brail, 2021. "Patterns amidst the turmoil: COVID-19 and cities," Environment and Planning B, , vol. 48(4), pages 598-603, May.
    3. Jose Maria Barrero & Nicholas Bloom & Steven J. Davis, 2020. "Why Working From Home Will Stick," Working Papers 2020-174, Becker Friedman Institute for Research In Economics.
    4. Victor Couture & Jonathan I. Dingel & Allison E. Green & Jessie Handbury & Kevin R. Williams, 2020. "Measuring Movement and Social Contact with Smartphone Data: A Real-Time Application to COVID-19," NBER Working Papers 27560, National Bureau of Economic Research, Inc.
    5. Gupta, Arpit & Mittal, Vrinda & Peeters, Jonas & Van Nieuwerburgh, Stijn, 2022. "Flattening the curve: Pandemic-Induced revaluation of urban real estate," Journal of Financial Economics, Elsevier, vol. 146(2), pages 594-636.
    6. Jan K. Brueckner & Matthew E. Kahn & Gary C. Lin, 2023. "A New Spatial Hedonic Equilibrium in the Emerging Work-from-Home Economy?," American Economic Journal: Applied Economics, American Economic Association, vol. 15(2), pages 285-319, April.
    7. Nicholas Bloom & Ruobing Han & James Liang, 2022. "How Hybrid Working From Home Works Out," NBER Working Papers 30292, National Bureau of Economic Research, Inc.
    8. Arjun Ramani & Nicholas Bloom, 2021. "The Donut Effect of Covid-19 on Cities," NBER Working Papers 28876, National Bureau of Economic Research, Inc.
    9. Sang Yoon (Tim) Lee & Minsung Park & Yongseok Shin, 2021. "Hit Harder, Recover Slower? Unequal Employment Effects of the COVID-19 Shock," Review, Federal Reserve Bank of St. Louis, vol. 103(4), pages 367-383, October.
    10. John Gathergood & Fabian Gunzinger & Benedict Guttman-Kenney & Edika Quispe-Torreblanca & Neil Stewart, 2020. "Levelling Down and the COVID-19 Lockdowns: Uneven Regional Recovery in UK Consumer Spending," Papers 2012.09336, arXiv.org, revised Dec 2020.
    11. Gonzalez-Pampillon, Nicolas & Nunez-Chaim, Gonzalo & Overman, Henry G., 2024. "The economic impacts of the UK's eat out to help out scheme," Journal of Urban Economics, Elsevier, vol. 143(C).
    12. Nicolás González-Pampillón & Gonzalo Nunez-Chaim & Katharina Ziegler, 2021. "Recovering from the first Covid-19 lockdown: Economic impacts of the UK's Eat Out to Help Out scheme," CEP Covid-19 Analyses cepcovid-19-018, Centre for Economic Performance, LSE.
    13. Keisuke Kokubun & Yoshinori Yamakawa, 2021. "The Impact of Work Characteristics on Social Distancing: Implications at the Time of COVID-19," IJERPH, MDPI, vol. 18(10), pages 1-14, May.
    14. Stephan D. Whitaker, 2023. "Understanding Migration Trends to Prepare for the Post-Pandemic Future," Cleveland Fed Regional Policy Report, Federal Reserve Bank of Cleveland, issue 20230801, pages 1-32, August.
    15. Couture, Victor & Dingel, Jonathan I. & Green, Allison & Handbury, Jessie & Williams, Kevin R., 2022. "JUE Insight: Measuring movement and social contact with smartphone data: a real-time application to COVID-19," Journal of Urban Economics, Elsevier, vol. 127(C).
    16. Kanishka Misra & Vishal Singh & Qianyun (Poppy) Zhang, 2022. "Frontiers: Impact of Stay-at-Home-Orders and Cost-of-Living on Stimulus Response: Evidence from the CARES Act," Marketing Science, INFORMS, vol. 41(2), pages 211-229, March.
    17. Delventhal, Matthew J. & Kwon, Eunjee & Parkhomenko, Andrii, 2022. "JUE Insight: How do cities change when we work from home?," Journal of Urban Economics, Elsevier, vol. 127(C).

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    More about this item

    Keywords

    Remote work; High-skill services; Technological change;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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