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 US 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 US 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 affiliate sales by 2 percent. Finally, focusing on time zone differences our findings suggest that affiliate sales increase the more time zones we have to overcome.
|Date of creation:||08 Feb 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (+43 1) 798 26 01-0
Fax: (+43 1) 798 93 86
Web page: http://www.wifo.ac.at/
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.:
- 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.
- Elisabeth Christen & Joseph Francois, 2010.
"Modes of Delivery in Services,"
Economics working papers
2010-08, Department of Economics, Johannes Kepler University Linz, Austria.
- 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.
- 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.
- Thierry Mayer & Soledad Zignago, 2011.
"Notes on CEPII’s distances measures: The GeoDist database,"
2011-25, CEPII research center.
- 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.
- Ivar Kolstad & Espen Villanger, 2004.
"Determinants of foreign direct investment in services,"
CMI Working Papers
WP 2004: 2, CMI (Chr. Michelsen Institute), Bergen, Norway.
- 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.
- Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
- Joseph F. Francois & B. Hoekman, 2009.
"Services Trade and Policy,"
wiiw Working Papers
60, The Vienna Institute for International Economic Studies, wiiw.
- 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.
- 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.
- 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 526-43, December.
- V.N. Balasubramanyam, 2008. "Foreign Direct Investment," Chapters, in: International Handbook of Development Economics, Volumes 1 & 2, chapter 39 Edward Elgar.
- Kikuchi, Toru & Marjit, Sugata, 2010.
"Time Zones and Periodic Intra-Industry Trade,"
24473, University Library of Munich, Germany.
- 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 520-44, September.
- J Peter Neary, 2005.
"Trade Costs and Foreign Direct Investment,"
200512, School of Economics, University College Dublin.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:wfo:wpaper:y:2013:i:445. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilse Schulz)
If references are entirely missing, you can add them using this form.