## CITIES AFTER THE PANDEMIC

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### Impact of COVID-19 and remote work on urban life
- The double shock of the COVID-19 pandemic and the remote-working revolution raised fears of permanently empty offices and a downward cycle for some cities.
- In May 2020, "two-thirds of Americans with advanced degrees were working from home."
- Google mobility data show:
  - workplace visits in the United States were still down by 28 percent in August 2022 compared with the pre-pandemic period;
  - in Manhattan and London, workplace visits were down by more than 45 percent.
- Remote and hybrid work have produced geographic freedom and raised concerns about reduced demand for local services, unemployment, and diminished public services in some cities.

### Historical perspective on cities and epidemics
- Urban life has long provided strong economic and social benefits: higher earnings, opportunity for the dispossessed and displaced, shared cultural amenities, and lower suicide rates in cities than in rural areas.
- Epidemics have repeatedly shaped urban fortunes:
  - The first well-documented urban plague struck Athens in 430 BCE.
  - The Plague of Justinian hit Constantinople in 541 CE.
  - The Black Death killed perhaps one-third of Europe’s population in the 14th century; survivors became richer as labor shortages led to higher wages, contributing to the urban renaissance of the 15th century.
- Nineteenth century globalization accelerated spread of yellow fever and cholera, yet cities continued to attract migrants because of economic incentives and public-health investments (for example, New York’s Croton Aqueduct).
- Before 2020, the wealthy world treated pandemic risk cavalierly; prior outbreaks (SARS, MERS, Ebola, swine flu) were contained without severe damage, and HIV’s devastation was concentrated largely in sub-Saharan Africa.

### Four reasons cities are likely to survive and thrive
- 1) Face-to-face contact remains economically valuable:
  - The hypothesis that technology will make face-to-face contact obsolete has been discredited repeatedly.
  - Technology increases returns to learning, which is fostered by proximity.
  - Evidence: Nicholas Bloom (2015) and coauthors found that Chinese call center workers sent home saw productivity (calls per hour) improve, but other evidence shows remote work reduces promotion prospects.
  - Natalia Emanuel and Emma Harrington (2020) find essentially no change in productivity from working at home, but both papers find that workers’ chances of promotion fell more than 50 percent when they worked remotely.
  - Microsoft research reported that “firm-wide remote work caused the collaboration network of workers to become more static and siloed,” with “a decrease in synchronous communication and an increase in asynchronous communication,” which “may make it harder for employees to acquire and share new information across the network.”
  - Remote learning was broadly disastrous for children.
- 2) Cities as centers of consumption and amenities:
  - Urban agglomeration produces better restaurants and shared fixed-cost cultural amenities.
  - Between the 1970s and the 2000s, urban prices rose much faster than urban wages, consistent with increased demand for urban amenities.
  - Younger people have shown strong desire to return to face-to-face interactions.
- 3) Price adjustments in commercial real estate:
  - Landlords with unoccupied offices will cut rents and eventually find firms eager for space where reasonable demand exists.
  - In lower-end markets with weak pre-pandemic fundamentals, demand may fall so low that landlords walk away, buildings may be converted to housing, or left empty.
- 4) Continued urbanization in poorer countries:
  - Much of the world remains poor; for the poor, urban economic appeal typically outweighs health fears.
  - Google mobility data show workplace visits are substantially higher now than before the pandemic in cities such as São Paulo, Brazil, and Lagos, Nigeria.
  - Videoconferencing can help skilled workers in poorer cities connect to the wealthy world.
  - However, slower business travel may reduce foreign direct investment in developing-world cities; pre-pandemic air links were significant predictors of financial ties.

### Winners, losers, and heterogeneity across cities
- Sunbelt cities (example: Austin, Texas, and Phoenix, Arizona) experienced strong growth in housing prices, employment, or housing construction; such markets may have overshot and could correct.
- Rust belt cities suffered more; teleconferencing can substitute for proximity to suppliers and professional services.
- Firms may relocate from traditional hubs (for example, from Chicago’s Loop to Miami) if routine interactions can occur online and amenities attract talent.
- Start-ups priced out of Silicon Valley are more likely to relocate to amenity-rich, lower-cost cities (example: Austin) than to operate entirely remotely.
- Developing-world cities largely returned to work, but many economies remain depressed:
  - Africa’s GDP fell by 2 percent during 2020, according to World Bank data.
  - Low vaccination rates in poorer regions mean more COVID-19 deaths and heightened risk of new variants emerging there.
  - Over the past six decades, the bulk of “spillover events” have originated in some of the poorest parts of the planet.
- Factors that increase disease emergence in poor regions include more contact with disease-carrying wildlife, longer survival of vectors such as mosquitos, and limited sanitation.

### Policy recommendations to reduce pandemic risk
- Invest more in public health and medical-care systems in the wealthy world and in poorer parts of the planet to prevent future pandemics.
- Adapt the IMF’s model of rich-country assistance tied to policy reforms to pandemic prevention:
  - A proposed "massive health exchange" where rich countries provide significant aid for public-health infrastructure in exchange for recipient-country commitments to:
    - keep humans away from animal carriers of disease;
    - better monitor new illnesses;
    - commit to rapid response and containment.
- The global community must heed the warning of COVID-19’s toll—millions of deaths and enormous economic disruption—and invest in global hygiene to avoid a potentially worse pandemic.

*David M. Cutler and Edward Glaeser, Finance & Development, December 2022.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2022/december/cutler.pdf_