Virtual Transfer of Labour Services and Financial Capital Between Non-overlapping Time Zones

This article incorporates international transfer of financial capital, a process that is essential to the offshoring of labour services across time zones but has been ignored. Considering two identical countries, we check the effect of utilisation of time-zone difference, which involves virtual transfer of financial capital along with labour services. Time-zone difference reduces the production time, enabling producers to repay the borrowed financial capital earlier and incur a lower interest rate compared to autarky. Consequently, both countries experience an increase in productivity. Further, because of the inclusion of financial capital transfer, both countries experience different changes in their factor prices. This implies that it becomes necessary for policy makers to decide whether to promote their country as a source or a host.