This report evaluates the costs and benefits of home-based telecommuting. Combining empirical data from the literature with a Monte Carlo simulation technique, a distribution of cost-benefit ratios is produced from three perspectives: the employer, the telecommuter, and the public sector.... Depending on the underlying assumptions, the results indicate that telecommuter benefit-cost ratios are generally above one if the employer bears the majority of the equipment cost burden. ...Even when parking and office space benefits are included, productivity lies at the heart of the telecommuting cost-benefit analysis from the employer's perspective, and in almost all cases, the employer's case relies on some assumed maintenance or increase in productivity as the primary benefit. It is also shown that the potential for office and parking space benefits are high, although these benefits remain somewhat questionable. ...Based on our analysis, we conclude that the public sector air quality and construction avoidance benefits remain somewhat questionable based on the current knowledge, and difficult to justify.... Keywords: telecommuting, cost-benefit analysis, simulation, telecommunication

This literature review has been prepared to synthesize and assess previous small-scale economic evaluations of telecommuting. These small-scale studies can be categorized as telecommuting pilot projects that take into account telecommuter and employer costs and benefits. (The reader is referred to a 1998 review of macro-scale telecommuting literature by Shafizadeh et al.). In this report, four studies are selected and examined as representing the state of practice regarding methodology and assumptions. The report identifies common inputs, critical assumptions, and limitations of these works. Finally, the major findings of each study are presented and compared to claims found in promotional literature. Among the primary findings of this review is the conclusion that few pilot evaluations contained cost-benefit results. Nonetheless, the results that are available supplement the macro-scale studies and furnish a variety of empirical values that are essential in complete cost-benefit analyses.