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International service transactions: Is time a trade barrier in a connected world?


  • Bianka Dettmer

    () (Friedrich-Schiller-University Jena)


The firms' international fragmentation of production has recently widened its focus from outsourcing of intermediates to off-shoring of business services such as software program development and international call centre networks. Although a large number of business services are intangible and non-storable, gravity model estimates show that geographical distance between business partners is still relevant even when information and communication technologies (ICT) provide alternatives for face-to-face interaction. It has recently been argued that time zones can be a driving force of international service transactions by allowing for continuously operating over a 24 hours business day. In this paper, we find empirical evidence for the continuity effect in trade of business and commercial services which is even higher for trade with Non-OECD countries and robust to measurement and sample size. We show that the time zone effect in trading business services is dependent on the level of ICT infrastructure.

Suggested Citation

  • Bianka Dettmer, 2011. "International service transactions: Is time a trade barrier in a connected world?," Jena Economic Research Papers 2011-003, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2011-003

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    References listed on IDEAS

    1. Marjit, Sugata, 2007. "Trade theory and the role of time zones," International Review of Economics & Finance, Elsevier, vol. 16(2), pages 153-160.
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    Cited by:

    1. Vilas Pathikonda & Thomas Farole, 2017. "The Capabilities Driving Participation in Global Value Chains," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 1-26, February.
    2. Amador, João & Cabral, Sónia, 2014. "Global value chains: surveying drivers and measures," Working Paper Series 1739, European Central Bank.
    3. Toru Kikuchi & Sugata Marjit & Biswajit Mandal, 2013. "Trade with Time Zone Differences: Factor Market Implications," Review of Development Economics, Wiley Blackwell, vol. 17(4), pages 699-711, November.
    4. Sugata Marjit & Toru Kikuchi, 2011. "Time Zones and FDI with Heterogenous Firms," Discussion Papers Series 425, School of Economics, University of Queensland, Australia.
    5. Edward Anderson, 2014. "Time differences, communication and trade: longitude matters II," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(2), pages 337-369, May.
    6. Mandal, Biswajit & Marjit, Sugata & Nakanishi, Noritsugu, 2013. "Time Zones, Factor Prices and Inflow of Educational Capital: Changing Sectoral Composition," MPRA Paper 50883, University Library of Munich, Germany.
    7. Egger, Peter H. & Larch, Mario, 2013. "Time zone differences as trade barriers," Economics Letters, Elsevier, vol. 119(2), pages 172-175.
    8. Noritsugu Nakanishi & Ngo Van Long, 2015. "The Distributional and Allocative Impacts of Virtual Labor Mobility across Time Zones through Communication Networks," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 638-662, August.
    9. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.
    10. Mandal, Biswajit & Marjit, Sugata & Nakanishi, Noritsugu, 2015. "Outsourcing, Factor Prices and Skill Formation in Countries with Non-overlapping Time Zones," MPRA Paper 68227, University Library of Munich, Germany.

    More about this item


    international trade; business services; gravity model; distance; time zones; digital divide;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F20 - International Economics - - International Factor Movements and International Business - - - General


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