A production function that exhibits diminishing returns helps to explain the reason that:

Question

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The concept of diminishing returns in a production function suggests that as a country continues to increase the input of labor and capital, the additional output generated from these inputs decreases over time. This principle supports the catch-up growth phenomenon, where developing countries, starting from a lower base of capital and productivity, can initially grow more rapidly than high-income countries because the marginal gains from additional inputs (capital, labor) are higher when the starting point is lower. High-income countries, having already heavily invested in capital and labor, face diminishing returns on further investments, making their growth rates slower in comparison.

A Production Function That Exhibits Diminishing Returns Helps to Explain