Development Accounting, the Elasticity of Substitution, and Non-neutral Technological Change

We apply the tools of development accounting to a broad panel over the period 1970-2014. However, we depart from the traditional Cobb-Douglas hypothesis with Hicks-neutral technological change, and assume a CES technology, which allows for a constant but non-unitary elasticity of substitution, and for non-neutral technological change. For different values of the elasticity of substitution, and different representations of technological change, we find that the cross-country variation in GDP per worker accounted for by factor inputs is decreasing over time until the mid-2000s, when it reverses its trend. In addition, we find that in the recent period technology accounts for up to 80% of the cross-country variation in GDP per worker.