Time differences, trade and communication
DEV Key Contact: Edward Anderson
Project Dates: January 2010 to March 2012
Project Status: Complete
What impact do time differences have on international trade? On the one hand, time differences raise the costs of travel and communication, by causing jet-lag among travellers and by reducing the amount of time in the normal working day in which simultaneous communication (e.g. telephone conversations, video-conferencing) can take place. If travel and simultaneous communication are important for trade – for example, by helping to establish and maintain trust, by spreading information about trading opportunities, or by facilitating the flow of complex, tacit know-how among vertically disintegrated production networks – greater time differences should lead to less trade. On the other hand, time differences promote opportunities for trade in services. For example, by employing teams in different time zones, firms can work on product design and development around the clock, thereby reducing product turnaround times.
It builds on two previous studies of this issue by including a wider set of control variables, a longer time period, and by testing a series of additional related hypotheses. The main results indicate that time differences have a negative and statistically significant impact on overall trade. There is also evidence that the negative impact of time differences has fallen during recent decades, and is smaller where the rule of law in each trading partner is stronger, and where bilateral migrant populations are larger. There is also evidence that time differences reduce international communication, in the form of bilateral telephone traffic. These results are consistent with the hypothesis that time differences reduce trade by raising the non-pecuniary costs of travel and communication.
DEV Researchers: Edward Anderson
Longitude matters II: new evidence of the impact of time differences on international trade and communication. DEV Working Paper 36, School of International Development, University of East Anglia.