The resourcerich gulf countries are not known for their manu

The resource-rich gulf countries are not known for their manufacturing or service-based industries. But counties like Japan and South Korea, in spite of their resource constraints, have developed world class manufacturing and service centers.

Can the Rybczynski Theorem explain this phenomenon? Explain.

Solution

The Rybczynski theorem explains the relationship between endowment and output , ie. how changes in an endowment affects the outputs of the goods when full employment is sustained.

Manufacturing and service centers are capital intensive units, and Japan and south korea are highly developed in terms of technology. Hence, according to rybczynski theorem, increase in their capital endowment (keeping the output price same) increased, both their output and efficiency in manufacturing and service centres.