Impact of Capital Deepening on Productivity

Medium Economic Growth And Development Capital Deepening

Capital deepening refers to the process whereby an economy increases its capital per worker, which can lead to enhanced productivity and growth. In this context, consider an economy that has experienced significant increases in education and training programs for its workforce. These programs aim to improve the skills and efficiency of workers, leading to a more productive labor force.

Which of the following statements best describes the impact of capital deepening in this scenario?

Capital deepening necessarily leads to an increase in total output even without additional investment in physical capital.

Capital deepening can enhance productivity, but only if there is also an increase in investment in physical capital.

Capital deepening without focus on skills can result in diminishing returns to labor.

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