Time Zone Effect and the Margins of Exports

Abstract

AbstractThe negative effect of time zone on trade flows has recently been established in the literature. However, thus far, no paper has explored the differing time zone effect on the intensive and extensive margin. Utilising product‐level trade data, this paper examines the impact of time zone differences on the intensive and extensive margin of exports. Furthermore, this paper examines the non‐linear impact of different levels of time zone differences on exports. Using the Poisson pseudo‐maximum likelihood estimation, the results indicate that the time zone differences negatively affect exports primarily via the extensive margin, with no effect on the intensive margin, which suggests that time zone differences act as a fixed cost of exporting. Furthermore, quartile analysis shows non‐linearities in the time zone measure, more specifically that time zones matter more at larger time zone differences. These results can have important policy implications for nations looking to increase their trade presence.