Distance related time zone difference, waiting time, trade, and Dutch disease

This paper develops a theoretical framework to examine trade dynamics across four sectors: services, manufacturing, importable goods and the informal sector. The model investigates the role of distance in shaping trade patterns, outputs, and factor prices, highlighting the key differences between goods and services trade, particularly their sensitivity to distance related marketing cost. The model presents the possibility of ‘Dutch disease’ in the informal sector. Distinguishing between goods and services in terms of marketing and transport costs, the model reveals how resources—especially skilled labour—are allocated between service and manufacturing sectors. Furthermore, it outlines two scenarios for the informal sector, independent and integrated with manufacturing, in exploring how these configurations affect trade and production. Moreover, the empirical results corroborate findings obtained in the theoretical model and deepen our understanding of the complex interactions between time zone and trade.