The lifespan of a freshly made donut typically stretches to just two days.
Yet when we turn our gaze from pastries to the so-called “donut effect,” coined by Stanford economist Nicholas Bloom during the pandemic, we find that this phenomenon shows no signs of expiration.
Instead, it captures a transformative shift in the urban landscape, illustrating how city life is evolving in the wake of a seismic global event.
Migration Patterns
Bloom’s analysis reveals a striking trend: the migration from bustling urban centers to the surrounding suburbs is reshaping America’s major cities.
Since the pandemic began, the twelve largest metropolitan areas in the United States have experienced an average population decline of 8% within their downtowns.
The trend is especially pronounced, with a significant 60% of those who left urban cores relocating to nearby suburban neighborhoods, according to a study published in the Proceedings of the National Academy of Sciences.
This migration has led to a marked decrease in businesses within the central business districts of cities like New York, Boston, Atlanta, and San Francisco.
Surprisingly, other cities across the U.S. have largely avoided this transformation, or at least witnessed it on a much smaller scale.
For urban policymakers and business leaders, the notion that downtown economies are swiftly recovering to pre-pandemic conditions comes as a startling counterpoint to the emerging reality.
Fiscal Challenges and Remote Work
Although the situation paints a daunting picture for urban planners—who now confront challenges like dwindling public transportation ridership and vacant storefronts—the outlook is not entirely bleak.
Bloom expresses cautious optimism, suggesting that while the donut effect may not be escalating, it appears set to become the “new normal” for these metropolitan areas.
A key factor driving this change is the enduring nature of remote work, particularly among the skilled workforce that has significantly influenced urban migration.
Many people have discovered that suburban living offers not just more space, but also greater affordability, fostering a reluctance to return to the hustle and bustle of city life.
Looking Towards the Future
The research team, which includes MIT doctoral student Arjun Ramani and Joel Alcedo from the Mastercard Economics Institute, highlights the stark contrasts in property values emerging between urban centers and their suburban counterparts.
This divide, which began during the pandemic, has grown to a staggering 40-percentage-point gap by last year, placing financial strain on urban property tax revenues.
The donut effect has ushered in a range of fiscal challenges for major cities, complicating efforts to reverse these trends.
As cities grapple with decreased tax revenues alongside increased expenditures, suburbs are thriving in ways that urban centers struggle to replicate.
Bloom and Ramani previously quantified the donut effect in 2021, linking it to the rise of remote work.
Their recent study revisits this theme, integrating new data sources such as Zillow real estate values and USPS change-of-address records, as well as GPS data from automotive manufacturers.
This expansive research indicates that the donut effect transcends U.S. borders, impacting global metropolises like Sydney, Berlin, and Toronto.
The U.S. data further reveals that among those who departed urban cores, 58% moved to nearby suburbs, while 29% opted for smaller cities and 9% chose other major urban centers.
Only a small fraction, 4%, relocated to rural areas.
The sustained impact of the donut effect is closely linked to the prevalence of remote work, especially in larger cities populated by people capable of performing their jobs from the comfort of their homes.
Those who left urban environments typically moved 10 to 15 miles away, with the effect diminishing beyond this radius.
This trend aligns with hybrid work preferences, as people seek to balance the costs associated with commuting multiple times a week.
Conversely, cities with lower rates of hybrid work, such as Cleveland and Nashville, exhibit minimal or no signs of the donut effect.
Smaller urban areas requiring a significant in-person workforce, such as Des Moines and Boulder, similarly remain largely unaffected.
As large urban areas navigate the implications of this ongoing shift, difficult decisions loom on the horizon.
Cities may need to contemplate spending cuts, tax increases, and a comprehensive restructuring of their downtown landscapes.
Although Bloom posits that remote work could represent a “win-win-win” scenario for businesses, employees, and society, the clear beneficiaries are offset by the central areas of major cities that face declining vitality.
Whether the donut effect ultimately favors iconic cities like Manhattan or San Francisco remains uncertain.
Still, there is a glimmer of hope: as essential workers in lower-paying, in-person jobs find themselves increasingly priced out of suburban living, they may find their way back to the larger cities where their work is centered, potentially revitalizing urban areas in the process.
This shift could mark a new chapter in the ongoing evolution of America’s urban landscape, even as cities reckon with lasting changes today.
“`htmlStudy Details:
- Title: How working from home reshapes cities
- Authors: Arjun Ramani, Nicholas Bloom, Steven Davis, Joel Alcedo
- Journal: Proceedings of the National Academy of Sciences
- Publication Date: December 3, 2024
- DOI: 10.1073/pnas.2408930121