Explain the per-worker production function and its relationship to the catch-up effect. Give an example of how the catch-up effect works.

Question

What will be an ideal response?

Answer 1

but students should demonstrate a thorough understanding of the per-worker function and how successive increases in capital per worker provide diminishing returns. This relates to the catch-up effect because it indicates that a capital investment in a poor country with little capital will boost output by a larger amount than the same investment in a country that already has adequate capital. For instance, investing $100 million in a port upgrade in the United States may make an already efficient port slightly more productive. Investing the same amount in a capital-poor country like Angola would enable a massive upgrade in port capacity and efficiency.