The Effects of Flexible Workspace on Organizational Structure and Inequality: An Equilibrium Analysis

The need to implement home-office after the COVID-19 pandemic impacts the flow of knowledge transmitted within an organization. As companies restructure their hierarchies to ensure the best use of the time of their managers, impactful changes in the job markets will follow. Using a general equilibrium approach, we predict that an increase in internal communication costs generates a fall in the economy’s wealth, a decline in the dispersion of wages and also of managers’ compensations, but an increase in overall inequality. Moreover, we predict that the new configuration of the economy will feature more firms, but of smaller size. ©Springer ©The authors.