A country with a lower alpha will have a lower benefit from further capital deepening. This is a statement from the CFA course, but I don’t understand why it is the case. Wouldn’t a country with lower alpha (a.k.a less of the output going to capital) actually benefit more from capital deepening? Because the country with a lower alpha would see a higher percentage increase in the capital-to-labour ratio than a country which already has a high capital-to-labour ratio?
If a country is already in the steady state rate, then they will not be seeing much benefit from capital deepening, regardless of what alpha is. If a country has a lower alpha, then it will take them longer to get to that steady state rate.