Beyond the Donut Effect: Understanding How Amenities in Neighboring Urban and Suburban Counties Vary Differently Due to Work-from-home-related Activity after Covid-19

Abstract

This paper investigates the potential causal relationship between work-from-home (WFH) activity and shifting amenities between adjacent urban and suburban counties. It extends the literature by building upon the foundation established by existing studies that explore the impacts of work-from-home-related migration on housing prices. These studies show that the areas to which telecommuters move often experience increases in housing prices, while the areas they left experience the opposite. Analyzing amenities across housing prices, labor force participation, individual welfare outcomes, and new business activity, I find that higher WFH activity seems to have the greatest effect on housing prices, as shown in the literature, and on unemployment rates. For the former, urban counties experience a decline in housing price growth relative to neighboring suburban counties and, similarly, these urban counties also see increases in unemployment relative to their nearby suburbs. Beyond this, I find evidence of other unexpected significant effects in areas of lower WFH activity, as well as effects in the opposite direction of my predictions in the highest-WFH- activity areas. It appears that other mechanisms, such as sectoral composition and existing urban productivity gaps, may confound this investigation of the effects of WFH. These conclusions are important because they suggest the need for a more robust specification of the experiment tested in this paper, as well as the exploration of new mechanisms in order to paint a clearer picture of how bordering urban and suburban areas were differently affected by the COVID-19 pandemic.