South SFV Today

The "donut effect," a term coined by Stanford economist Nicholas Bloom, continues to impact major U.S. cities as people migrate from city centers to suburbs. According to Bloom's research, published in the Proceedings of the National Academy of Sciences (PNAS), the 12 largest U.S. cities have seen an 8% decrease in downtown residents since the pandemic began. Three-fifths of these households moved to nearby suburbs.

Bloom's study highlights a significant reduction in businesses within business districts of major metropolitan areas such as New York, Boston, and San Francisco. In contrast, smaller or medium-sized cities have experienced minimal or no donut effects.

Policymakers and business leaders may find these results surprising given perceptions that downtown economies are recovering post-pandemic. However, Bloom and his co-authors argue that recovery is not occurring as expected and that America's largest cities will face long-term changes due to this trend.

"The good news for these cities is that the donut effect isn’t getting bigger," says Bloom, who holds positions at both the Stanford Institute for Economic Policy Research (SIEPR) and Stanford School of Humanities and Sciences. He attributes this shift largely to remote work practices which have allowed high-skilled workers to remain in more affordable suburban areas.

Urban planners face challenges as city centers experience reduced public transit usage and increased vacancies while suburbs benefit from new taxpayers. The study shows a divergence in home values between urban cores and suburbs, creating fiscal stress for large cities.

"The donut effect has created a lot of fiscal stress for major U.S. cities that is going to be very difficult to overcome," Bloom notes.

The study revisits earlier analysis with updated data sources including Zillow real estate values, USPS change-of-address forms, GPS data from a large automaker, and Mastercard consumer spending records across 118 global cities.

Data indicates 58% of households leaving big-city downtowns relocated to surrounding suburbs; only 4% moved to rural areas. The persistence of working from home among skilled workers contributes significantly to the ongoing donut effect.

Medium-sized cities like Cleveland or Indianapolis show less pronounced effects due to lower rates of remote work necessity compared with larger metros where many job categories require physical presence.

For America's biggest urban centers facing potential restructuring efforts involving budget cuts or tax hikes amid dwindling revenues coupled with increasing costs associated with maintaining infrastructure amidst declining populations within central districts – painful decisions loom ahead accordingly suggests Nicholas Bloom:

"I often say that work from home is a ‘win-win-win’ because businesses employees societies are better off,” he remarks but acknowledges certain sectors particularly those reliant upon dense concentrations employment opportunities may suffer consequences resulting directly indirectly related phenomenon known collectively today simply 'donut.'

Though uncertain whether Manhattan San Francisco financial district other prominent locales ultimately benefit detrimentally longer term implications remain unclear some silver linings exist possibility essential lower-paid personnel previously priced out suburban markets afford once again reside closer workplaces thereby potentially improving quality life overall context broader societal shifts underway nationwide presently unfolding backdrop evolving economic landscape increasingly characterized flexibility adaptability technological innovation transformative nature digital age economy itself now emerging forefront contemporary discourse policy debate circles alike globally regionally locally all levels government private sector alike stakeholders involved actively engaged ongoing dialogue seek address mitigate manage myriad challenges opportunities arising therein context dynamic complex interconnected world we inhabit today tomorrow beyond into future generations yet come still 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