Faktorendowments

Factor endowments, or Faktorendowments, describe the stock of production factors that a country possesses. The main factors typically cited are labor, physical capital, land and natural resources, and sometimes human capital and entrepreneurship. The composition and absolute size of these endowments help determine the economy's production possibilities and the relative costs of goods and services.

In international trade theory, particularly the Heckscher-Ohlin model, relative factor endowments determine comparative advantage: countries export products that use their abundant factors intensively and import those that require those factors in relative shortage. This framework helps explain why different regions specialize and how trade patterns align with factor abundance.

Factor prices and income distribution are also linked to endowments. The scarcity or abundance of factors affects wages, rents, and returns to capital. Endowments can be redistributed via immigration, capital flows, and policy measures that influence investment and technology.

Dynamics and measurement of endowments acknowledge that they change over time. Population changes, investment, technological progress, and natural resource depletion alter the mix and size of endowments. Domestic mobility of factors tends to adjust prices, while cross-country mobility is limited by institutions and trade barriers; capital accumulation can alter a country's endowment mix through capital deepening.

Limitations exist in applying factor endowment theory. The model relies on assumptions such as perfect competition and similar technology across countries. Real-world outcomes are shaped by institutions, technology, economies of scale, and productivity. Modern analyses broaden the concept to include human capital and institutions as core determinants alongside traditional endowments.