ABSTRACT
What determines a country's COMPARATIVE ADVANTAGE in the production of goods and services? What explains the trade flows observed around the world today? Several theories and empirical analyses in international trade have been advanced to explain why trade takes place among countries. Most economists have followed the neo-classical explanation and believe that factor endowments go a great way to explain international trade patterns (see NEO-CLASSICAL ECONOMICS). Factor endowment can be defined as the quantity and quality of the factors of production - land, labour, capital and natural resources - that a nation possesses.
