Time Zone Differences and Service Trade

Abstract

The paper explains how service trade has been facilitated because of the availability and development of Information and Communication Technology (ICT). With this, the paper points to the emerging theory of time zone (TZ) differences and trade where time zone difference between two countries evokes service trade given the availability of ICT. A simple 2 × 2 general equilibrium framework is considered to explain the effect of trade across non-overlapping time zones on factor prices and output. Results show a rise in the wage of skilled labour and a fall in rent. The result is conditional on the assumptions of factor intensity. In the case of output, the sector exploiting the time zone difference is seen to expand while the other contracts. This outcome, however, is independent of the assumption of factor intensity.