Telework-induced urban sprawl and traffic congestion: a social discount rate analysis

Abstract Following the reopening phase of the pandemic and easing mobility restrictions, traffic congestion returned to pre-pandemic levels despite the implementation of remote or hybrid work schedules. This resurgence of congestion has the potential to affect spatial planning and contribute to urban sprawl in metropolitan areas. A model was developed to derive a formula for the social discount rate (SDR), explaining why telework-induced congestion leads to an increase in the SDR for policymakers. This model also provides theoretical support for the increasing trend in government funding for highway and street projects as supply side strategies to alleviate congestion in recent years. We also calibrate the model using data from the U.S. economy to demonstrate its real-world relevance. From a policy perspective, with the possible rising output levels triggered by an increase in the labor productivity of telecommuters and a higher SDR, governments can find “expanding road capacity” practical with a lower fiscal burden on the public budget in real financial terms.