Working from Home: What Is the Effect on Employees' Effort?

The prevalence of working from home arrangements in firms has increased over the past decades due to advancements in information and communication technologies. By providing their employees the possibility to work from home firms aim to achieve a better work-family balance for their employees and thus increased employees’ effort. Employees with fewer work-family conflicts have a stronger motivation and are therefore willing to provide more work effort.

Empirical evidence on how working from home arrangements influence employees’ effort is scarce. Some studies analyze the relationship between working from home and employees’ productivity using survey data. Yet, they use subjective indicators, which measure employees’ perceived productivity change. Other studies investigate the influence of working from home on employees’ productivity with experimental data in order to estimate causal effects. However their empirical results apply to a small subgroup of individuals and are not fully transferable to the whole population of employees.

This paper contributes to the literature by investigating the effect of working from home on employees’ effort with a large, individual-level dataset from Germany, the German Socio-Economic Panel (SOEP). We provide an empirical investigation across all industries and occupations to obtain a comprehensive analysis of working from home arrangements with high external validity. Moreover we use different forms of working from home. Many studies mention that it is important to consider how often employees work from home, but do not include this measure in their empirical analysis. To the best of our knowledge this is the first study that accounts for the frequency of working from home.

There is a twofold influence of working from home on employees’ effort. First, working from home improves an employee’s working conditions. At home an employee has a quieter atmosphere than in the office, because of being less often distracted by his colleagues. The second aspect is employees’ motivation. If employees have the possibility to work from home, they can better manage their family and working lives. Therefore they have a higher intrinsic motivation for their work and have a stronger motivation to spend more time on it. Thus we expect working from home to positively influence employees’ effort. Moreover we expect the positive effect to be larger the longer employees stay at home.

To measure individual work effort we determine the difference between average actual working time and contractual working time. This is an objective indicator that shows the extra effort of employees. We assume that higher work effort leads to higher productivity. In order to interpret our results in a causal manner, we additionally plan to perform an instrumental variable approach as the decision to work from home is endogenous.

First empirical evidence shows that working from home indeed significantly increases employees’ effort. Additionally, we find only a significant effect of working from home for employees, who stay several times per week at home. Thus employees can optimally use the advantages of working from home, if they work from home for at least a certain amount of hours.