Het neoklassieke groeimodel: Kapitaalverdieping

Capital deepening takes place when capital grows faster than the workforce, raising the amount of capital per worker.

For example, consider a farm—say, Agro Farm. Over time, it invests in more advanced machinery, such as replacing manual seeders with automated planters. As a result, each worker has more equipment to work with, raising productivity.

In the Solow model, output is described by an aggregate production function: Q = F(L,K), where the inputs, labor and capital, measure the level of output in the economy. When expressed in per-worker terms and holding technology constant, the function becomes Gw = f(Kw), where Gw represents output per worker and Kw represents capital per worker.

As Agro Farm increases capital per worker, output per worker rises, following a concave production curve, as the graph shows this relationship. The economy moves up along this curve, but at diminishing returns to capital. Each new unit of capital yields smaller gains resulting from diminishing returns.

Capital deepening alone cannot sustain long-term growth, as output gains diminish unless there is technological progress.