The Role of Time Zone Differences on Bilateral Service Flows from Kenya

Abstract

ABSTRACT This study investigates the effect of time zone differences on service exports (total and nine categories—travel, transport, computer and information, construction, financial, insurance, government, other business services, and personal, cultural, and recreational services) from Kenya. Estimates from the Poisson Pseudo-Maximum Likelihood (PPML) estimator of the gravity model on bilateral service exports data from Kenya to 176 countries, for the period 2005–2019, show that the effects of time zone differences between Kenya and partner countries is positive and statistically significant in technology-sensitive service exports (computer and information) while negative for construction and government service exports. Further analysis shows that these results are robust when an alternative model is employed and overlapping workday hours are used. The authors also find that the effect of time zone differences on services is nonlinear and sensitive to regulations and physical infrastructure (particularly mobile subscriptions). Attracting investment in technology-sensitive sectors should be encouraged through appropriate policy, given the positive impact of time zone differences on their exports. Traders in these sectors can also create networks with foreign firms. Deregulating and developing information and communication infrastructure, to expand mobile subscriptions, should also be encouraged.