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Abstract:
Time is money, and distance matters. We model the interaction of these truisms, and show the
implications for global specialization and trade: products where timely delivery is important will be
produced near the source of final demand, where wages will be higher as a result. In the model, timely
delivery is important because it allows retailers to respond to fluctuating final demand without holding
costly inventories, and timely delivery is only possible from nearby locations. Using a unique dataset that
allows us to measure the retail demand for timely delivery, we show that the sources of US apparel
imports have shifted in the way predicted by the model, with products where timeliness matters
increasingly imported from nearby countries.
Full paper (358 KB PDF)
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