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A simple model of time zone differences, virtual trade and informality

A simple model of time zone differences, virtual trade and informality This paper aims to strive to model virtual trade resulting from time zone differences in an otherwise Heckscher–Ohlin set up which is absent in the literature. So, the paper adds some value to the existing literature on time zones (TZ) and trade.Design/methodology/approachA competitive general equilibrium model is developed first to capture the effect of TZ differences on virtual trade. Then the authors examine, in brief, if distance can be accommodated in such framework. Finally, the authors extend the model to incorporate informality.FindingsIt is seen that exploitation of time zone difference benefits skilled labor and hurts capital under reasonable assumption. In what follows, time zone difference exploiting sector expands, whereas the other sector contracts. Then, the model has been extended to examine how distance may also lead to similar outcomes. In addition, the model is further modified to explore the effect of virtual trade in an informality and associated extortion ridden economy. Interestingly, virtual trade turns out to be beneficial to unskilled workers as well, and leads to a fall in the number of extortionists, though informal production is augmented.Research limitations/implicationsThis model is a competitive model that may not clearly reflect the realistic world. However, interestingly this may form the basis of looking into some other appealing dimensions of the real world.Originality/valueTZ and related communication-cost-driven trade arguments are relatively less explored theoretically. Therefore, the work adds some value to the theoretical understanding of outsourcing in service trade that uses day-night differences across the globe. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Indian Growth and Development Review Emerald Publishing

A simple model of time zone differences, virtual trade and informality

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1753-8254
DOI
10.1108/igdr-12-2018-0128
Publisher site
See Article on Publisher Site

Abstract

This paper aims to strive to model virtual trade resulting from time zone differences in an otherwise Heckscher–Ohlin set up which is absent in the literature. So, the paper adds some value to the existing literature on time zones (TZ) and trade.Design/methodology/approachA competitive general equilibrium model is developed first to capture the effect of TZ differences on virtual trade. Then the authors examine, in brief, if distance can be accommodated in such framework. Finally, the authors extend the model to incorporate informality.FindingsIt is seen that exploitation of time zone difference benefits skilled labor and hurts capital under reasonable assumption. In what follows, time zone difference exploiting sector expands, whereas the other sector contracts. Then, the model has been extended to examine how distance may also lead to similar outcomes. In addition, the model is further modified to explore the effect of virtual trade in an informality and associated extortion ridden economy. Interestingly, virtual trade turns out to be beneficial to unskilled workers as well, and leads to a fall in the number of extortionists, though informal production is augmented.Research limitations/implicationsThis model is a competitive model that may not clearly reflect the realistic world. However, interestingly this may form the basis of looking into some other appealing dimensions of the real world.Originality/valueTZ and related communication-cost-driven trade arguments are relatively less explored theoretically. Therefore, the work adds some value to the theoretical understanding of outsourcing in service trade that uses day-night differences across the globe.

Journal

Indian Growth and Development ReviewEmerald Publishing

Published: Mar 12, 2021

Keywords: Informality; Corruption; Trade; Factor prices; Time zone; D73; E26; F1; F11; J31

References