The Future of Work and Consumption in Cities after the Pandemic: Evidence from Germany

We estimate the impact of Covid-induced working from home (WFH) on offline consumer spending in urban agglomerations. Our analysis draws on postcode-level data on card transactions and WFH patterns in major German cities between January 2019 and May 2022. We address endogeneity in WFH uptake by esti...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Jean-Victor Alipour, Falck, Oliver, Krause, Simon, Krolage, Carla, Wichert, Sebastian
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2022
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Summary:We estimate the impact of Covid-induced working from home (WFH) on offline consumer spending in urban agglomerations. Our analysis draws on postcode-level data on card transactions and WFH patterns in major German cities between January 2019 and May 2022. We address endogeneity in WFH uptake by estimating intention-to-treat effects based on “untapped WFH potential”, i.e. the share of employees with a teleworkable job who did not WFH pre-pandemic. This measure approximates the local scope to expand WFH and explains both observed WFH growth during the pandemic as well as prospective employer plans and employee desires. Difference-in-differences estimates show that local spending increases by 2–3 percent per standard deviation higher untapped WFH potential. The effects are only significant in non-lockdown periods and after Covid restrictions are permanently lifted. Null effects during lockdowns are consistent with temporary shifts toward online spending when business closures preclude regional relocation of offline consumption.