AbstractThis paper studies the evolution of long‐run output and technical progress growth rates in the G‐7 countries during the post‐war period by considering the concept of the natural rate of growth. We use time‐varying parameter models that incorporate both stochastic volatility and a Heckman‐type two‐step estimation procedure that deals with the possible endogeneity problem in the econometric models. Our results show a significant decline in long‐run growth rates that is not associated with the detrimental effects of the Great Recession, and that the rate of growth of technical progress appears to be behind the slowdown in long‐run GDP growth.