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Does working from home make employees more productive?

The Economist [paywall] – “Yes, according to new research, and they should be paid accordingly. Remote working, relatively uncommon before the pandemic, has gone mainstream. Before covid-19 roughly 5% of Americans worked from home. By May the figure had risen to 62%. By October 40% were still shunning the office. Both employers and employees have grumbled that the shift to home-working has been disruptive. But according to new research by Natalia Emanuel and Emma Harrington, two doctoral students in economics at Harvard, firms may be better off…” From the paper  “Working” Remotely? Selection, Treatment, and the Market Provision of Remote Work:

“Why was remote work so rare prior to Covid-19’s lockdown? One possibility is that working remotely reduces productivity. Another is that remote work attracts unobservably less productive workers. In our setting of call-center workers at a Fortune 500 retailer, two natural experiments reveal positive productivity effects of remote work. When Covid-19closed down the retailer’s on-site call-centers, a difference-in-difference design suggests the transition from on-site to remote work increased the productivity of formerly on-site workers by 8% to 10% relative to their already remote peers. Similarly, when previously on-site workers took up opportunities to go remote in 2018-2019, their productivity rose by 7%. These two natural experiments also reveal negative selection into remote work.While all workers were remote due to Covid-19, those who were hired into remote jobs were 12% less productive than those hired into on-site jobs. Extending remote opportunities to on-site workers similarly attracted less productive workers to on-site jobs. Our model allows us to characterize the counterfactual in which remote workers were not adversely selected. Without adverse selection, the retailer would have hired 57% more re-mote workers and worker surplus from remote work would have been 32% greater. Given the central role of selection, Covid-19’s effect on remote work will persist if the lockdown disproportionately causes more productive workers to be willing to work remotely.”

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