Even if you start from the premise that, for a given developer, that developer contributes more locally than remotely, there's still a pretty good argument for remote work: talent pool.

You can have a fair-to-middling programmer in the bay area locally, or the best programmer in all of Michigan remotely. What you lose by not having people locally you gain by having better people, in theory.

This applies to any locale as well. If you limit your search to only those people within driving distance of your office, you're almost guaranteed to get a lower caliber dev than if you were able to hire any dev in the world.