The weakness of local firms and R&D spending in GCC countries can be justified by Rybczynski theorem
(Rybczynski, Economica, 1955) and resource curse phenomenon.
More broadly, the Rybczynski Theorem assumes fully employed global and domestic resources at invariant domestic relative factor and goods prices.
Despite the level of abstraction required for unambiguous results from the Rybczynski Theorem, a germ of truth emerges: rapidly growing, large countries are sensitive to the implications for their terms of trade arising from rapid increases in factor endowments.
This is just the joint result of the Rybczynski theorem
and the Stolper-Samuelson theorem linked by the endogenous terms of trade, which explains the simultaneous effects of changes of quantities of factor endowments both on the changes of output and on the changes of price.
As capital flows in, the Rybczynski Theorem
tells more of good 1 will be produced, shrinking imports.
By the Rybczynski theorem
, industry Y (K-intensive) expands while industry X (L-intensive) declines, both relatively and absolutely.
When industrial production functions are linear homogeneous, the sign of [y.sup.i.sub.k] (i = [alpha], [beta]) follows directly from the Rybczynski theorem