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A Simple Model of Service Offshoring with Time Zone Differences

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  • Toru Kikuchi

    ()
    (Graduate School of Economics, Kobe University)

  • Ngo Van Long

    ()
    (Department of Economics, McGill University)

Abstract

We propose a two-country monopolistic competition model of business service offshoring that captures the advantage conferred by time zone differences. We emphasize the role of the entrepreneurs, who decide how to produce business services (i.e., domestic service provision or service offshoring). It is shown that the utilization of communication networks induces a dramatic change in industrial structure due to entrepreneurial relocation (i.e., service offshoring) to take advantage of time zone differences. We also show that in the presence of moving costs for entrepreneurs, technological improvements and the resulting increase in service offshoring may reduce a countryfs welfare.

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File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2009/0916.pdf
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Bibliographic Info

Paper provided by Graduate School of Economics, Kobe University in its series Discussion Papers with number 0916.

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Length: 25pages
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:koe:wpaper:0916

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Web page: http://www.econ.kobe-u.ac.jp
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Keywords: Service Offshoring; Time Zone Differences; Technological Change; Entrepreneurs; Communication Networks;

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  1. Mitra, Devashish & Ranjan, Priya, 2007. "Temporary Shocks and Offshoring: The Role of External Economies and Firm Heterogeneity," IZA Discussion Papers 2811, Institute for the Study of Labor (IZA).
  2. Kikuchi, Toru & Iwasa, Kazumichi, 2010. "A simple model of service trade with time zone differences," International Review of Economics & Finance, Elsevier, Elsevier, vol. 19(1), pages 75-80, January.
  3. Robert C. Feenstra & Barbara J. Spencer, 2005. "Contractual Versus Generic Outsourcing: The Role of Proximity," NBER Working Papers 11885, National Bureau of Economic Research, Inc.
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  7. Head, Keith & Mayer, Thierry & Ries, John, 2009. "How remote is the offshoring threat?," European Economic Review, Elsevier, Elsevier, vol. 53(4), pages 429-444, May.
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  15. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 39(4), pages 1177-1203, December.
  16. Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing: Is It Justified?," NBER Working Papers 10808, National Bureau of Economic Research, Inc.
  17. Toru Kikuchi, 2003. "Interconnectivity of communications networks and international trade," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 36(1), pages 155-167, February.
  18. Mary Amiti & Shang-Jin Wei, 2009. "Service Offshoring and Productivity: Evidence from the US," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 32(2), pages 203-220, 02.
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Citations

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Cited by:
  1. Mukherjee, Arijit & Suetrong, Kullapat, 2012. "Trade cost reduction and foreign direct investment," Economic Modelling, Elsevier, Elsevier, vol. 29(5), pages 1938-1945.
  2. Beladi, Hamid & Chakrabarti, Avik & Marjit, Sugata, 2013. "Cross-border mergers in vertically related industries," European Economic Review, Elsevier, Elsevier, vol. 59(C), pages 97-108.
  3. Rebecca Tomasik, 2013. "Time zone-related continuity and synchronization effects on bilateral trade flows," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 149(2), pages 321-342, June.
  4. Edward Anderson, 2014. "Time differences, communication and trade: longitude matters II," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 150(2), pages 337-369, May.
  5. Beladi, Hamid & Chakrabarti, Avik & Marjit, Sugata, 2014. "A public firm in a model of spatial duopoly with price discrimination," Economics Letters, Elsevier, Elsevier, vol. 123(1), pages 79-81.
  6. Choi, Jai Young & Choi, E Kwan, 2013. "Financial Advantage, Outsourcing and FDI under Wage Uncertainty," Staff General Research Papers, Iowa State University, Department of Economics 37376, Iowa State University, Department of Economics.
  7. Beladi, Hamid & Marjit, Sugata & Weiher, Kenneth, 2011. "An analysis of the demand for skill in a growing economy," Economic Modelling, Elsevier, Elsevier, vol. 28(4), pages 1471-1474, July.

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