This equilibrium is unstable, though, because we are considering a situation in which Home is more skilled-labor-abundant than Foreign, and the initial condition for factor endowments
is given by a point such as A.
VFDI flows between two countries will not occur unless factor endowments
are sufficiently different.
Krugmen (1983 and 1990) has intertwined "firm-specific variables" and "country-specific variables" (factor endowments
), which generate transaction cost incentives through integration of up-stream and down-stream activities (inside a firm and within the country), and movement of MNCs across national boundaries arise from unequal factor endowments
to reap the benefit of unequal factor prices.
On the other hand, it suggests that we need to understand better how to alter factor endowments
when societies may not have the internal will to do so.
Or are differences in growth explained by the historical pattern of settlement between so-called settler colonies or conquest ones, or are there different local factor endowments
which would influence these outcomes?
Beyond that, for given factor endowments
, an expansion of the output of the labor-intensive exportable sector requires contraction of the output of the import competing good.
A technological change is considered as a real occurrence, and, for given factor endowments
, it leads to an increase in the conventional measure of real GDP.
template was shaped by egalitarian institutions (a commitment to equality of opportunity); by the factor endowments
of the New World (lots of land relative to labor); and by republican ideology, meaning democracy and pluralism.
Unintended Consequences: The Impact of Factor Endowments
, Culture, and Politics on Long-Run Economic Performance
By totally differentiating expression (2) holding the world price of both tradeables and factor endowments
constant we thus obtain:
Alternatively, international trade may be derived from a similarity of economic factors other than those associated with the availability of factor endowments
Because of factor endowments
and their own shortsightedness, landowners would continue to seek surplus value from exploitation of tenant sharecroppers rather than through modernization and increased production.