Telecommuting and Equilibrium Analysis of Urban Structures in Metropolitan Areas in Recent Years

Abstract

With recent advances in communications technology, telecommuting appears to be an increasingly practical option for many workers. We developed a theoretical framework to study telecommuting in the city with general equilibrium models originally developed by Fujita (1982) and Ota (1993). In these models, each firm is assumed to interact with all other firms through business communications.
We showed that the effects of telecommuting in an equilibrium city depend on the interplay of four effects ; 1) a reduction in costs caused by a decrease in floor space for an office in the city center, 2) additional costs from choosing telecommuting, 3) reduction of commuting costs, and 4) additional costs for the households from choosing telecommuting.
This study considered a typical pattern for firms and households that choose telecommuting. We examined under what conditions (on parameters) this land use pattern represents an equilibrium configuration. All firms that adopt telecommuting are located in central areas. Firms that do not choose telecommuting are located near central areas. All workers other than the telecommuters for all firms commute daily from the surrounding residential areas. Telecommuters remain in the suburbs.
Consequently, the model is able to explain trends observed in the spatial organization of large cities, that is, working at home in suburban areas. Specifically, the telecommuting rate increases as the fixed costs for telecommuting and the telecommuting cost rate falls. When the population size of the firm continues to increase, the telecommuting rate also increases. This implies that telecommuting happens easily in a large city. We also showed that, depending on parameters, a variety of interesting patterns of metropolitan spatial organization emerge.

JEL Classification: R14, R30, L20