What is the factor endowment theory?
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According to the classical theory of international trade, countries specialise in producing those goods in which they have a comparative advantage over their competitors, and then obtain their other commodity requirements by exchanging domestically produced goods for imports which they are not able to produce economically themselves. Historically the trade of the countries of the Middle East has tended to conform to this pattern, although, increasingly, government regulation of economic affairs has meant that the trade flows predicted by classical laissez-faire models have tended to be distorted. A country’s comparative advantage in the production of a particular commodity is of course determined by what is usually referred to as its ‘factor endowment’, or in other words, the local availability of resources such as labour, agricultural land, mineral resources, capital or technology. Thus, for example, Egypt which has abundant cheap labour, and a good supply of fertile irrigated land, has specialised in cotton production for which its climate is well suited, and for over a century has traded cotton exports for imports of manufactured goods.1 Similarly, for hundreds of years Iran has specialised in carpet production, with the skilled weavers of Tabriz and Isfahan using local wool from the mountains. Neighbouring Iraq has specialised in dates,while in North Yemen the main export has been coffee. Show Keywords
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Learn about institutional subscriptions PreviewUnable to display preview. Download preview PDF. Unable to display preview. Download preview PDF. For a detailed account of Egypt’s emergence as a cotton exporter see Robert Owen, Cotton and the Egyptian Economy 1820–1914 (Oxford University Press, 1969). Google Scholar Robert Mabro, ‘Employment and Wages in Dual Agriculture’, Oxford Economic Papers, Vol. 23, No. 3 (1971) 401–17. Google Scholar International Labour Organisation, Rural Employment Problems in the U.A.R. (Geneva, 1969). Google Scholar Bent Hansen, ‘Employment and Wages in Rural Egypt’, American Economic Review, Vol. LIX (1969) 298–313. Google Scholar In spite of this high population growth, per capita incomes have risen however in most countries in the area. See Galal Amin, The Modernization of Poverty (E. J. Brill, Leiden, 1974), Chapter 1. Google Scholar In fact there is perhaps over-urbanisation. See Galal Amin, The Modernization of Poverty (E. J. Brill, Leiden, 1974), Chapter 3. Google Scholar Keith McLachlan, Planning and Industrialisation in Iran (Focus Research, 1975). See also earlier 1974 report on Iran by Focus Research. Google Scholar Rodney Wilson ‘Business Climate Remains Favourable for Foreign Investors and Contractors’, The Times Supplement on Egypt 26 March 1975. Also later article by the author in The Times 5 November 1975. Google Scholar Robert Stevens, The Arabs’ New Frontier: A History of the Kuwait Fund ( Temple Smith, London, 1973 ). Google Scholar Robert Z. Aliber, ‘Oil and the Money Crunch’, National Westminster Bank Review, February 1975; Google Scholar Jan Tumlir, ‘Oil Payments and Oil Debt in the World Economy’, Lloyds Bank Review (June 1974). Google Scholar Minos Zombanakis, ‘Arab Funds and the Markets’, The Banker (July 1974). Google Scholar International Monetary Fund, International Financial Statistics (December 1975). Google Scholar Although they will have to improve on their previous industrial performance as outlined by Julian Bharier, Economic Development in Iran 1900–1970 (Oxford University Press, 1971). Google Scholar As the authors of most introductory texts on development emphasise at the start. See Walter Elkan, An Introduction to Development Economics (Penguin, 1973 ). Google Scholar Also Matthew McQueen, The Economics of Development (Weidenfeld and Nicolson, 1973). Google Scholar Download references Authors
Copyright information© 1977 Rodney Wilson About this chapterCite this chapterWilson, R. (1977). The Factor Endowment. In: Trade and Investment in the Middle East. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-03299-0_1 What are the four factors of endowment?Factor endowments differ from country to country and from territory to territory. Some countries may have more endowments of factors of productions while others may not have a lot of them. These factors of production include land, labour, capital and entrepreneurship.
Who has given factors endowment theory?The theory was developed by the Swedish economist Bertil Ohlin (1899–1979) on the basis of work by his teacher the Swedish economist Eli Filip Heckscher (1879–1952).
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