Trend breaks and the long-run implications of investment-specific technological progress

I update the Greenwood, Hercowitz, and Krusell (1997) decomposition of U.S. growth into contributions from neutral and investment-specific technological progress. I allow the decomposition to vary across sub-samples, reflecting the presence of trend breaks in the data. The estimates suggest that neutral technological progress explained virtually all growth between 1950 and the mid-1970s. However, investment-specific technological progress accounts for about 75 percent of growth since the 1980s. These results support splitting the postwar sample and using two-sector models to study the recent period.