Factor Endowments in a South- South Relation PDF

Please forward this error screen to ganesh. For example, a country where capital and land are abundant but labor is scarce has a comparative advantage factor Endowments in a South- South Relation PDF goods that require lots of capital and land, but little labor—grains. If capital and land are abundant, their prices are low. As they are the main factors in the production of grain, the price of grain is also low—and thus attractive for both local consumption and export.


Författare: Max Rebol.
China s new partnership with Africa has created one
of the most interesting South- South relationships.
Through its growing demand for natural resources,
China has turned into one of the largest investors in
Africa; some patterns indicate a vested North- South
relation with China in the role of the USA. The
different endowments of the regions lead to different
outcomes, most notably in migration and inequality.
The labour abundance of China in combination with its
capital abundance in relation to Africa creates a
pattern of migration of unskilled labour which is
relatively unprecedented in this form. This on the
other hand has also effects on unskilled labour in
Africa. As for inequality, trade based on different
endowments benefits different parts of the society.
Only because of being labour abundant, China could
achieve a significant reduction of poverty through
openness to investment and trade. Africa is in a
different position. The continent s land abundance
benefits mainly the land owning elite with further
implications for trade preferences or migration.

The Ricardian model of comparative advantage has trade ultimately motivated by differences in labour productivity using different „technologies“. O model has identical production technology everywhere“. Bertil Ohlin first explained the theory in a book published in 1933. Ohlin wrote the book alone, but he credited Heckscher as co-developer of the model because of his earlier work on the problem, and because many of the ideas in the final model came from Ohlin’s doctoral thesis, supervised by Heckscher. Interregional and International Trade itself was verbose, rather than being pared down to the mathematical, and appealed because of its new insights. O model assumed that the only difference between countries was the relative abundances of labour and capital. Ohlin model contained two countries, and had two commodities that could be produced.

The model has „variable factor proportions“ between countries—highly developed countries have a comparatively high capital-to-labor ratio compared to developing countries. With this single difference, Ohlin was able to discuss the new mechanism of comparative advantage, using just two goods and two technologies to produce them. One technology would be a capital-intensive industry, the other a labor-intensive business—see „assumptions“ below. The model has been extended since the 1930s by many economists. 2 model was derived with restrictive assumptions, partly for the sake of mathematical simplicity.