Trade theory and the role of time zones

International time difference, due to the location of countries in different time zones, determines pattern of trade in a vertically integrated Ricardian model. The idea is related to service trade in the information technology sector. Technological progress helps in generating trade through “nature”-driven comparative advantage. Time-difference emerges as an independent driving force of international trade besides taste, technology and endowment. Our model also predicts that free transfer of technology will improve global welfare.