Productivity is output per hour, so its also possible for output to fall and productivity to rise. This will be the usual case with fewer hours.
But are they actually more productive, or are they just spending additional hours "looking busy"?
When I worked in office I "worked" 40 hours/week because I had to. Most of that wasn't actually work, maybe about 20-30 hours of actual work, sometimes less. Working from home I have no pressure to pretend to work, there's no "butt-in-chair" requirements. I get slightly more done from home, and exchange I don't have to waste 10-15 hours/week at my desk for no reason other than to make some manager feel good about having butts in chairs.
This obviously depends on what the work is. People whose job is to focus on building things for hours at a time have very different optimal work environment from people who meet with and coordinate other people in short bursts. So no one-size-fits-all top-down policy can be effective; local flexibility is required.
How do you think Google grows? They invented PageRank and have been on a set trajectory since?
Google didn't catch up to and surpass OpenAI by doing nothing.
I work from home quite a bit, but I'm expected to be available and working during business hours. So other than not commuting to the office, it's not a huge difference.