chapter  20
3 Pages

Concluding remarks

The phenomenon of growing worldwide connectivity among individuals, firms, and organizations via improved communications networks raises myriad questions of economic importance. Foremost is the question of how communications networks influence the patterns of world specialization and trade, and with network-based trade in intangible services becoming increasingly possible, what is the role of time zone differences as a determinant of comparative advantages among countries? This book takes up these challenging questions. Based on monopolistic competition models of trade à la Dixit, Stiglitz, and Krugman, as reviewed in Chapters 3 to 5, I have examined the interaction between communications networks and international trade. In Chapter 6, I emphasize the country specificity of communications networks. I show that the quality and scale of the communications infrastructure within a country, and the number and sophistication of people using that infrastructure, become crucial factors determining the patterns of trade. There will be a cumulative process in which the export of the network goods brings an opportunity for entry, and the entry promotes exports. Then, in Chapter 7, I explain the role of the interconnectivity of communications networks. The number of countries connected to international networks is found to determine the structure of comparative advantage. That is, countries with interconnected networks have a comparative advantage in the product that requires business services provided via networks. In connected countries, producers of that product benefit from the efficient transmission of business services. Based on those arguments, Chapters 9 to 11 discuss the role of time zone differences as a determinant of trade and growth. One basic message is that, combining communications networks and time zone differences, countries can take advantage of their “remoteness” (in terms of longitude) as a source of comparative advantage. These chapters also emphasize the “continuity effect” (i.e., working around the clock) as a key driver of trade in services. The consumption of network-related (or information-intensive) products is crucially related to the existence of both network effects and switching costs. In Part III (Chapters 12 to 15), using foundations from the industrial organization

literature, I have presented various monopolistic competition trade models with these features. From this we may conclude that, in the globalized world economy, trade patterns are highly dependent upon the degree of those network effects and switching costs. For example, in Chapter 13, it is shown that if the number of hardware varieties is reduced by trade liberalization, some consumers may be made worse off by opening trade. It should be noted that competition in the integrated market is likely to lead to standardization with a single hardware/ software system. Finally, in Part IV (Chapters 16 to 19), I have turned to the basic theory of international trade, with special reference to the role of cost heterogeneity among and within countries. Although these chapters are not directly related to the analysis of either communications networks or time zone differences, they might provide some groundwork for future work on those topics.