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Endowment Theory

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The Endowment Theory

The essence of this paper is to compare and contrast between the two countries of Saudi Arabia and Canada. The paper will entail the factor endowment Theory of the above mentioned countries. It will discuss the impact of resource endowment on comparative advantage between the two countries. Moreover, it will explain the insight and challenges facing the above countries. The paper will also entail the aims of Saudi vision 2030 in relation to the factor endowment Theory. 

Through international trade market, countries benefit when they specialize in producing a particular goods which is much different from other producing countries. International trade is basically defined as the exchange of goods and services through capital across international territories. This therefore makes the trading partners to reap mutual gain when each country specializes in one particular goods for which it holds a comparative advantage and then engages in trade for other products.

Notably, country like Saudi Arabia produces a lot of oil thus enabling to export to other countries which lack the oil products or may be producing little oil to cater for its large population. Through national trading Saudi Arabia country is able to consume some of the oil it produces and export the remaining two other countries. In this context, the production possibility Frontier is also the consumption Frontier. Nonetheless coma Saudi Arabia has an absolute advantage introduction of oil in large quantities since it produces the oil more efficiently than other countries. The absolute advantage differs from comparative advantage which is   typically known as the ability to produce specific goods at a lower price.

Moreover Saudi Arabia has a more competitive advantage which gives the country the ability to produce oil at a lower marginal and opportunity cost over other countries. The specialization in oil in Saudi Arabia result in a more efficient use of world resources. When it trades with the Canada, The larger output of both products produced in different countries become available in both countries thus allowing the two countries to grow economically.

The Saudi Arabia produces oil very cheaply thus holding a comparative advantage in all production and export in order to finance its purchases of imports with other countries. The country has an advantage because it has richly endowed with oil production from its land. In relation to Canada the country has many Forest exporting wood and paper products to other countries (Drapeau et al, 2018). The supply of food commodities greatly depends on domestic demand. Canada as a country produces many trees for export since it has a small population which do not require much of the wood produced in the country.

Saudi Arabia being the largest exporter of oil in the world, it has impacted negatively on the natural environment of the country. Through oil drilling, it has led to oil spillage in water bodies, hydraulic fracturing, and air pollution. The country has greatly contributed to the world's most severe oil spill. In Canada, due to the growth of many trees, it has majorly influenced climatic change hence affecting forest in the country. It has impacted the trees to grow at a higher rate, disturbance patterns and the distribution of tree species after disturbances. (Morewedge et al, 2015). Additionally the forest may impact also negatively in the country scenes the risk of woodland fire occurring and drought can stress trees making more susceptible to attack by insects and diseases. The Resource says in both countries impact positively thus boosting the country's economy. 

 Nonetheless, it has contributed to the introduction of job opportunities among the large population in both countries, thus improving the living standards of the people in both countries.

This therefore implies that the endowment theory is a good predictor of trade patterns between the two mentioned countries. It gives the data between the two trading countries thus providing the correct information which may help the two countries in improving the estimation of trade patterns in the production of their commodities. However, the research shows that conventional factors are more important in determining the trade structure has new determinants should be included to help determine comparative advantage of the trading countries. Additionally the country similarity Theory should be applied with the endowment theory to help the two in Trading the particular goods and services.

Saudi Arabia as a country has placed its objectives and aims come vision 2030. The country has placed unique strategies that will enable it to improve and develop come the Year 2030. Notably, it will not just present a program of economic development and Investment but also deal with broader national modernization project which will improve its economy drastically. The objectives that have been planned in the year 2030 is that the leaders and citizens of the country should come to better terms in future in which all resources play a far less significant role in the economy than previous years where they had to fight over resources. The aim was to unite and do the necessary changes of the implicit social contract between the government management and the key constituencies.

Additionally, the country has a long-term plan in relation to its vision 2030 strategy which may help in reducing its reliance on oil by boosting investment, private sectors, and non-government organization in the country which may offer other job opportunities among the many citizens of Saudi Arabia. Moreover, it will also reduce and prevent pollution of the environment since they will focus also on non-oil commodities. Vision 2030 in Saudi Arabia implies a degree of social liberalization which may lead to development of entertainment and tourist sector in the country. It will also develop religious clerics and advanced education in the region. This will increase better relations between citizens and the state organizations both politically, socially, and economically (Nurunnabi, 2017). The above-mentioned aims we had the country of Saudi Arabia to improve economically thus attracting many tourists in the country. It will also lead to government stability hence reducing the number of conflicts among the citizens of the country. Lastly, this will make the country to appear and top with other developed countries thus trading with many different countries.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Morewedge, C. K., & Giblin, C. E. (2015). Explanations of the endowment effect: an integrative review. Trends in cognitive sciences, 19(6), 339-348.

Nurunnabi, M. (2017). Transformation from an oil-based economy to a knowledge-based economy in Saudi Arabia: the direction of Saudi vision 2030. Journal of the Knowledge Economy, 8(2), 536-564.

Drapeau, P., Cadieux, P., Deschenes, R., & Imbeau, L. (2018). Changes in species interactions within the cavity-using community in managed forest landscapes of the boreal mixedwood forest in eastern Canada. In ECCB2018: 5th European Congress of Conservation Biology. 12th-15th of June 2018, Jyväskylä, Finland. Open Science Centre, University of Jyväskylä.