Factor Endowments

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What are Factor Endowments? Meaning.

Factor Endowments are the resources which a country possess. The traditional main factors of production are land, location, resources, labor, capital, and population. These factors taken together make up the Comparative Advantage of a Nation.

Factor endowments are determined by:

  • geographical features such as climatic conditions and natural resources.

  • historical development and political stability.

  • social and demographic issues.

  • economic development, size and quality of the workforce and access to capital.

  • entrepreneurial skills and the freedom to pursue entrepreneurial activities.

Porter suggested in his book: "The Competitive Advantage of Nations" that it is competitive advantage (based on lower costs, technological innovation and product differentiation) rather than comparative advantage that is becoming an important factor in determining the pattern and direction of international trade.

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Compare also: Competitive Advantage of Nations  |  Industry Attractiveness  |  Depletion

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