Sample Answer

There are a few reasons why productivity growth in high-income economies does not slow down as it runs into diminishing returns from additional investments in physical capital and human capital.

• Technological progress: Technological progress can offset the effects of diminishing returns. For example, new technologies can help businesses to produce more output with the same amount of inputs.
• Capital deepening: Capital deepening refers to the process of increasing the amount of capital per worker. This can also help to offset the effects of diminishing returns. For example, if a business has more machines, each worker can produce more output.
• Human capital accumulation: Human capital accumulation refers to the process of increasing the skills and knowledge of workers. This can also help to offset the effects of diminishing returns. For example, if workers have more skills, they can produce more output.