The Distributional and Allocative Impacts of Virtual Labor Mobility across Time Zones through Communication Networks

Abstract

Using a specific-factors' model, with two goods (a shift-working good and a non-shift-working good), three factors (capital specific to shift-working, land specific to non-shift-working and labor) and two countries (Home and Foreign), which are located in different time zones, we highlight the impact of trade in labor services via communication networks on factor prices and production patterns. If two countries are identical in size, then under free trade in labor services, all workers work only in their local daytime, and night shift in each country is performed by imported labor services supplied by residents of the other country in their local daytime. Night-time wage becomes the same as daytime wage (a wage equalization result). Other factor prices are also equalized. In both countries, capital rental rate increases, while land rent decreases. However, if two countries are different in size, trade in labor services does not equalize wages: in the large country, wages for night-shift workers are higher than daytime wages and some residents work at night; in the small country, daytime wages become higher than night-time wages and no one works at night, and night-shift work is done by imported labor services from the large country. Land rent in the small country decreases. Land rent in the large country may or may not decrease, but it is always higher than in the small country. Capital rental rates in both countries are equalized and increase.

A new impetus for endogenous growth: R&D offshoring via virtual labor mobility

“…In this case, offshoring can lead to a deterioration in North's TOT. Although we also find these effects, the fea-5 In static settings, both Kikuchi and Long (2011) and Nakanishi and Long (2015) have examined the implications of trade in services across different time zone on the income distribution. The former is based on the standard Heckscher-Ohlin-Samuelson model; the latter on the Specific-Factors model.…”

Time Zone Difference, Comparative Advantage and Trade: A Review of Literature

“…Contrary to the assumption of identical trading countries, as evidenced in the studies discussed above, Nakanishi and Long (2015) also analyze the effect of trade on factor prices when Home and Foreign differ in their sizes. A model is constructed with two goods, X and Y, and two small economies, Home and Foreign, located in diametrically different time zones.…”

“…Kikuchi and Iwasa (2008) depict how a change in location of firms can allow them to take advantage of time zone difference whereas Kikuchi and Marjit (2010) relate trade between two countries with nonoverlapping time zones as periodic intra-industry trade. The effect of trade between countries located in different time zones on the factor market and factor prices of the trading countries have been examined in Matsuoka and Fukushima (2009), Kikuchi and Marjit (2010), Kikuchi and Long (2011), Mandal et al (2013), Kikuchi et al (2013), Nakanishi and Long (2015) etc. Further, Marjit (2011), Mandal (2015) and Marjit and Mandal (2016) have analyzed the effect of timezone-difference induced trade on the countries' growth rates.…”

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

“…To exploit this possibility, TZ of trading partners or countries must be non-overlapping [3]. This issue has been explained very nicely in Marjit (2007), Kikuchi (2011), Kikuchi and Marjit (2011), Kikuchi et al (2013), Anderson (2014), Dettmer (2014), Head et al (2009), Matsuoka and Fukushima (2010), Nakanishi and Long (2015), Mandal et al (2018b), Fink et al (2005), Mandal (2015), Marjit and Mandal (2017), etc. [4].…”

“…Mandal et al (2018b) explores the effect of virtual trade on factor prices, output and supply of educational capital. Kikuchi and Long (2011), Kikuchi et al (2013) and Nakanishi and Long (2015) focus on the changes in the demand for and wage of day and night shift workers (along with price of other factors such as capital or land). Our work is in line with these papers where, broadly speaking, we also check the effect of TZ on factor prices and output of the economy.…”