Time zones matter: The impact of distance and time zones on services trade
Using distance and time zone differences as a measure for coordination costs between service suppliers and consumers, we employ a Hausman-Taylor model for services trade by foreign affiliates. Given the need for proximity in the provision of services, factors like distance place a higher cost burden on the delivery of services in foreign markets. In addition, differences in time zones add significantly to the cost of doing business abroad. Decomposing the impact of distance into a longitudinal and latitudinal component and accounting for differences in time zones, it is possible to identify in detail the factors driving the impact of increasing coordination costs on the delivery of services through foreign affiliates. Working with a bilateral U.S. data set on foreign affiliate sales in services this paper examines the impact of time zone differences and East-West and North-South distance on U.S. outward affiliate sales. Both distance as well as time zone differences have a significant positive effect on foreign affiliate sales. By decomposing the effect of distance our results show that increasing East-West or North-South distance by 100 kilometers raises affiliates sales by 2%. Finally, focusing on time zone differences our findings suggest that affiliate sales increase the more time zones we have to overcome.
|Date of creation:||Jul 2012|
|Contact details of provider:|| Postal: Universitätsstraße 15, A - 6020 Innsbruck|
Web page: http://www.uibk.ac.at/fakultaeten/volkswirtschaft_und_statistik/index.html.en
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brainard, S Lael, 1997. "An Empirical Assessment of the Proximity-Concentration Trade-off between Multinational Sales and Trade," American Economic Review, American Economic Association, vol. 87(4), pages 520-544, September.
- Stein, Ernesto & Daude, Christian, 2007. "Longitude matters: Time zones and the location of foreign direct investment," Journal of International Economics, Elsevier, vol. 71(1), pages 96-112, March.
- Baldwin, Richard & Taglioni, Daria, 2006.
"Gravity for Dummies and Dummies for Gravity Equations,"
CEPR Discussion Papers
5850, C.E.P.R. Discussion Papers.
- Richard Baldwin & Daria Taglioni, 2006. "Gravity for Dummies and Dummies for Gravity Equations," NBER Working Papers 12516, National Bureau of Economic Research, Inc.
- Neary, J. Peter, 2009. "Trade costs and foreign direct investment," International Review of Economics & Finance, Elsevier, vol. 18(2), pages 207-218, March.
- J. Peter Neary, 2005. "Trade costs and foreign direct investment," Working Papers 200512, School of Economics, University College Dublin.
- Neary, J Peter, 2006. "Trade Costs and Foreign Direct Investment," CEPR Discussion Papers 5933, C.E.P.R. Discussion Papers.
- Lisa A. Kramer & Mark J. Kamstra & Maurice D. Levi, 2000. "Losing Sleep at the Market: The Daylight Saving Anomaly," American Economic Review, American Economic Association, vol. 90(4), pages 1005-1011, September.
- Kamstra, M.J. & Kramer, L.A. & Levi, M.D., 1998. "Losing Sleep at the Market: The Daylight-Savings Anomaly," Discussion Papers dp98-04, Department of Economics, Simon Fraser University.
- Peter Egger, 2005. "Alternative Techniques for Estimation of Cross-Section Gravity Models," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 881-891, November.
- Joseph Francois & Bernard Hoekman, 2010. "Services Trade and Policy," Journal of Economic Literature, American Economic Association, vol. 48(3), pages 642-692, September.
- Joseph F. Francois & Bernard Hoekman, 2009. "Services Trade and Policy," Economics working papers 2009-03, Department of Economics, Johannes Kepler University Linz, Austria.
- Francois, Joseph & Hoekman, Bernard, 2009. "Services Trade and Policy," CEPR Discussion Papers 7616, C.E.P.R. Discussion Papers.
- Joseph F. Francois & B. Hoekman, 2009. "Services Trade and Policy," wiiw Working Papers 60, The Vienna Institute for International Economic Studies, wiiw.
- Kolstad, Ivar & Villanger, Espen, 2008. "Determinants of foreign direct investment in services," European Journal of Political Economy, Elsevier, vol. 24(2), pages 518-533, June.
- Ivar Kolstad & Espen Villanger, 2004. "Determinants of foreign direct investment in services," CMI Working Papers WP 2004: 2, CMI (Chr. Michelsen Institute), Bergen, Norway.
- V.N. Balasubramanyam, 2008. "Foreign Direct Investment," Chapters,in: International Handbook of Development Economics, Volumes 1 & 2, chapter 39 Edward Elgar Publishing.
- Christen, Elisabeth & Francois, Joseph, 2010. "Modes of Delivery in Services," CEPR Discussion Papers 7912, C.E.P.R. Discussion Papers.
- Elisabeth Christen & Joseph Francois, 2010. "Modes of Delivery in Services," Economics working papers 2010-08, Department of Economics, Johannes Kepler University Linz, Austria.
- Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
- Thierry Mayer & Soledad Zignago, 2011. "Notes on CEPII’s distances measures: The GeoDist database," Working Papers 2011-25, CEPII research center.
- Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
- Joseph Francois & Miriam Manchin & Patrick Tomberger, 2015. "Services Linkages and the Value Added Content of Trade," The World Economy, Wiley Blackwell, vol. 38(11), pages 1631-1649, November.
- Francois, Joseph & Manchin, Miriam & Tomberger, Patrick, 2013. "Services linkages and the value added content of trade," Policy Research Working Paper Series 6432, The World Bank.
- Francois, Joseph, 2015. "Services Linkages and the Value Added Content of Trade," Papers 882, World Trade Institute.
- Loungani, Prakash & Mody, Ashoka & Razin, Assaf, 2002. "The Global Disconnect: The Role of Transactional Distance and Scale Economies in Gravity Equations," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 526-543, December.
- S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc.
- Feenstra, Robert C, 2002. "Border Effects and the Gravity Equation: Consistent Methods for Estimation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 491-506, December.
- Baltagi, Badi H. & Bresson, Georges & Pirotte, Alain, 2003. "Fixed effects, random effects or Hausman-Taylor?: A pretest estimator," Economics Letters, Elsevier, vol. 79(3), pages 361-369, June.
- Kikuchi, Toru & Marjit, Sugata, 2010. "Time Zones and Periodic Intra-Industry Trade," MPRA Paper 24473, University Library of Munich, Germany.