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

How does the Covid‐19 pandemic affect regional labor markets and why do large cities suffer most?

“…We hypothesize that the mechanism responsible for the unfavorable development of large agglomerations is an above‐average reduction in consumer demand, which leads to increased transitions into unemployment. In line with Althoff et al (2022) and Alipour, Falck, Krause, et al (2022), we interpret the result as pointing to a drop in consumption spending caused by the absence of (high‐income) consumers or commuters in city centers due to working from home, which may primarily affect retail sale and restaurants. Other industries in large cities might also be impaired via spillovers as sector‐specific shocks may propagate through localized input–output linkages.…”

“…The indicators may thus capture a prolonged decline in demand for goods and services provided especially in big cities. The findings of recent studies suggest that the Covid‐19 crisis gave rise to permanent changes in the spatial distribution of consumer demand from which in particular big cities might suffer (Alipour, Falck, Krause, et al, 2022; Althoff et al, 2022). This is in line with the persistent disadvantage that we detect for the large agglomerations and which is driven by more transitions into unemployment.…”

“…According to Althoff et al (2022), regional differences in the decline of spending in the United States, especially for the local service economies, are closely related to regional differences in the percentage of mobile (high‐skilled) workers who started working from home. Alipour, Falck, and Schüller (2023) show that increased working from home gave rise to a spatial shift in spending from previously consumption‐intensive urban centers toward more residential areas in Germany.…”

Firm Digitalisation and Mobility – Do Covid-19-Related Changes Persist?

“…Nonetheless, the share of online spending in total consumer spending extremely increased at the beginning of the pandemic, jumping from roughly 17% to above 35% during the first two lockdowns. In mid-2022, however, the share of online revenue declined but remained above the pre-crisis level at roughly 24% (Alipour et al, 2022). 5 Moreover, Alcedo et al (2022) find for the first phase of the pandemic that online spending is positively linked to Google's index of residential activity at the country level, i.e., the approximated relative time spent at home, but the correlation declined until mid-2021.…”

“…Hence, long-distance trips, e.g., at weekends, become more appealing as it is possible to work while travelling. Finally, even though studies indicate that individuals buy more often products online than before the pandemic (Alipour et al, 2022;Shaw et al, 2022), people may prefer hybrid shopping modes and search for products offline and only buy them online.…”