The Lingering Effects of Lockdown On Large Cities
Updated: Aug 10
Takeaway: A temporary pandemic lockdown permanently shifted large cities into a low-commuting routine because downtown productivity relies on collective coordination, whereas smaller cities returned entirely to their pre-pandemic baseline.
Key Points
Working downtown is a coordination problem: Being in the office is most valuable when colleagues, clients, and peers from other firms are also present.
Big cities have multiple stable states ("equilibria"): In large metro areas, a temporary push into working from home acted as a tipping point, permanently establishing a low-commuting pattern.
Small cities fully bounced back: Lacking the massive urban productivity spillover effects of major hubs, smaller cities have a single natural baseline to which they rapidly returned.
Why do central business districts in places like New York or San Francisco remain noticeably quieter years after the pandemic, while mid-sized cities like Madison, Wisconsin, feel as busy as ever?
Walk through a larger city on a Friday, and foot traffic is still far below 2019 levels. This persistent shift leaves urban leaders, business owners, and transit agencies wondering if office workers will ever fully return.
Understanding this divide touches on fundamental questions about everyday life: Why do cities exist in the first place? Why did suburban home values surge relative to downtown condos? And does staying home make our economies less productive over time?
Research
The Question: Why did a uniform, temporary disruption—the COVID-19 pandemic—lead to permanent changes in work arrangements in some cities but not others, and what does this mean for economic welfare?
The Data: Cellular location tracking data from SafeGraph (following foot traffic across US census blocks from 2020 to 2022), high-frequency Zillow home price indices, and decades of worker panel data from the American Community Survey and the National Longitudinal Survey of Youth.
The Approach: The researchers developed a dynamic economic model of city structure. They quantified trade-offs between the productivity gains of face-to-face interaction, travel congestion, commuting costs, and home flexibility across 278 US metropolitan statistical areas.
Findings
The researchers found that working in a city center relies heavily on a coordination mechanism. In urban economics, bringing workers together creates "agglomeration spillovers"—knowledge sharing, networking, and spontaneous collaboration that boost worker output. However, an individual worker only benefits from commuting downtown if other workers do the same.
When pandemic lockdowns temporarily forced almost everyone to stay home, they broke the shared habit of commuting. In major cities—where agglomeration benefits are strong—this push was large enough to select a new, low-commuting equilibrium. Even after public health restrictions lifted, workers stayed home because the downtown area had lost the critical mass of peers that made the daily commute worthwhile.
The empirical evidence confirms this theoretical prediction: Foot traffic split: In major metropolitan areas with over 1.5 million workers, trips to central business districts stabilized at roughly 60 percent of pre-pandemic levels. By contrast, smaller metro areas (under 150,000 workers) experienced the same initial lockdown drop but fully recovered to 100 percent of pre-pandemic commuting. Housing price gradients: In large cities, the historical price premium paid to live close to downtown flattened permanently as commuting frequency fell. In small cities, downtown housing rent gradients returned to their pre-pandemic slopes.
Limitations & Considerations
The model assumes a fixed city population and does not account for long-distance migration between cities over time. Additionally, the framework treats the hybrid schedule (the proportion of days spent working at home versus the office) as uniform across remote workers rather than an individually customized choice.
Why It Matters
If these findings are correct, individual corporate return-to-office mandates may be insufficient to restore downtown vibrancy because the coordination challenge spans across firms and industries.
The researchers estimate that cities permanently shifting to a low-commuting pattern experience a modest average long-run welfare loss of 2.3 percent (ranging up to 3.7 percent in metro areas like Los Angeles and San Jose). While workers face lower average wages due to reduced face-to-face learning and productivity spillovers, those losses are substantially cushioned by saved commuting time, reduced traffic congestion, and greater lifestyle flexibility.
Learn More
Paper Title: Remote Work and City Structure
Authors: Ferdinando Monte, Charly Porcher, and Esteban Rossi-Hansberg
Journal: American Economic Review
Publication Year: 2026
URL: https://www.aeaweb.org/articles?id=10.1257/aer.20231414
Econ Today Explains
Economic Concept: Multiple Equilibria
In economics, an "equilibrium" is a state of balance where no individual has an incentive to change their behavior, given what everyone else is doing. Some economic systems feature multiple equilibria—meaning there are several different stable states the economy could settle into under identical initial fundamentals.
Which state actually occurs often comes down to expectations and coordination. For instance, a major city can exist stably at high commuting levels (where everyone goes downtown because everyone else does) or low commuting levels (where people stay home because downtown is empty). A temporary shock—such as a pandemic lockdown—can push an economy permanently from one stable equilibrium to another without any underlying change in long-term technology or laws.
This article was written by AI but reviewed by a real human.
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