Development Accounting with Natural Capital and Variable Factor Shares

摘要

The standard baseline estimate in development accounting is imprecise for two reasons. First, there is a mismatch between the physical capital input and the estimate of physical capital's share-the fraction of aggregate income accruing to physical capital. I adjust for this mismatch, and in so doing incorporate natural capital. Second, despite evidence of cross-country variation in factor shares, development accounting nearly always assumes that factor shares are constant. I treat factor shares as variables, not constant parameters.