An Elementary Theorem on Gains from Virtual Trade

Marjit, Sugata and Yang, Lei (2020): An Elementary Theorem on Gains from Virtual Trade.

Abstract

Virtual markets allow consumers to save time costs to purchase goods and services. Countries lose relative to the conventional welfare gain when they increase consumption of non-virtual goods under free trade. We include the classical gains from trade theorem as a special case. For two identical countries that have same endowment and technology, the income difference between them can generate trade when we consider the time cost of purchasing goods. The rich country exports the non-virtual good and imports the virtual good while the poor country exports the virtual good and imports the non-virtual good.

• Item Type: MPRA Paper
• Language: English
• Keywords: Virtual Trade, Time Cost
• Subjects: F - International Economics > F1 - Trade > F10 - General; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O30 - General

References

Acharyya, R., 2013. International Economics: An Introduction to Theory and Policy. Oxford University Press, New Delhi, India. Acharyya, R., Kar, S., 2014. International Trade and Economic Development. Oxford University Press, UK.

Becker, Gary S., 1965. A Theory of the Allocation of Time. Economic Journal 75, 493–517.

Fernandes, A., Mattoo, A., Nguyen, H., and Schiffbauer, H., 2019. The internet and Chinese exports in the pre-ali baba era. Journal of Development Economics 138, 57–76.

Freund, C., Weinhold, D., 2002. The internet and international trade in services. American Economic Review 92 (2), 236–240.

Jones, R., Marjit, S. and Beladi, H., 1999. The Three Faces of Factor Intensities. Journal of International Economics 48(2), 413-420.

Keller, W., Yeaple, S., 2013. The gravity of knowledge. American Economic Review 103 (4), 1414–1444.

Kikuchi, T., Marjit S., 2011. Growth with time zone differences. Economic Modelling 28 (1-2), 63-640. Kikuchi, T., 2011. Time Zones, Communications Networks, and International Trade, Routledge.

Kneller, R., Timmis, J., 2016. ICT and exporting: the effects of broadband on the extensive margin of business service exports. Review of International Economics 24 (4), 757–796.

Levin, J., 2011. The Economics of Internet Markets. NBER Working Paper No. 16852.

Marjit, S., 2007. Trade Theory and the Role of Time Zones. International Review of Economics & Finance 16(2), 153-160.

Marjit, S., Mandal, B., 2017. Virtual Trade between Separated Time Zones and Growth. International Journal of Economic Theory 13 (2), 171-183.

Marjit, S., Mandal, B., and Nakanishi, N. 2020. Virtual Trade and Comparative Advantage. Springer Singapore.

Nakanishi, N., Van Long, N., 2020. A New Impetus for Endogenous Growth: R&D Offshoring via Virtual Labor Mobility. Review of International Economics 28(3), 846-883.

Ricci, L., Trionfetti, F., 2012. Productivity, networks, and export performance: evidence from a cross-country firm dataset. Review of International Economics 20 (3), 552–562.

Roy, U., 2005. International Trade and the Value of Time. Review of International Economics, 13(4), 757–769.

Varian, H., Farrell, J., Shapiro, C., 2004. The Economics of Information Technology. Cambridge University Press, Cambridge.