Factor endowment

A factor endowment, in economics, is commonly understood to be the amount of land, labor, capital, and entrepreneurship that a country possesses and can exploit for the production of capital and goods. Countries with a large endowment of resources tend to be more prosperous than those with a small endowment if all other things are equal. This concept of the relationship between a nation's factor endowment and its economic productivity underpins much of basic macroeconomics, such as the comparative advantage, international trade theory, and the Solow-Swan model. ^{[1] [2] [3]}

Some argue that the development of sound institutions to access and equitably distribute these resources is necessary in order for a country to obtain the greatest benefit from its factor endowment. ^{[4] [5]}

See also

• Environmental determinism
• Resource curse

References

1. "Heckscher-Ohlin model and factor endowments | Intermediate Microeconomic Theory Class Notes". Fiveable. Retrieved 2025-10-27.
2. "Solow Growth Model". Corporate Finance Institute. Retrieved 2025-10-27.
3. "What Is Comparative Advantage?". Investopedia. Retrieved 2025-10-27.
4. Sokoloff, Kenneth L.; Engerman, Stanley L. (September 2000). "Institutions, Factor Endowments, and Paths of Development in the New World". Journal of Economic Perspectives. 14 (3): 217–232. doi:10.1257/jep.14.3.217. ISSN   0895-3309.
5. Engerman, Stanley; Sokoloff, Kenneth (December 1994). Factor Endowments: Institutions, and Differential Paths of Growth Among New World Economies: A View from Economic Historians of the United States (Report). Cambridge, MA: National Bureau of Economic Research.