NY Fed, Working Remotely? Selection, Treatment, and the Market for Remote Work

“Adverse selection consequently offers an important missing piece to the puzzle of remote work’s rarity prior to Covid-19. Our estimates suggest that adverse selection distorts the decisions of 22 percent of call-center workers who do not choose to be remote because they do not want to pool with less productive types. There is promise that the pandemic could nudge the market into a more efficient equilbrium. Yet distortions will likely persist unless career opportunities can be equalized. Indeed, pre-pandemic remote workers were half as likely to be promoted as on-site workers, consistent with Bloom et al. (2015)’s RCT evidence.”