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Cognitive ability and economic growth: how much happiness is optimal?

Author

Listed:
  • Nik Ahmad Sufian Burhan

    (Universiti Putra Malaysia
    Universiti Putra Malaysia)

  • Mohamad Fazli Sabri

    (Universiti Putra Malaysia)

  • Heiner Rindermann

    (Chemnitz University of Technology)

Abstract

The cognitive human capital approach assumes that cognitive abilities (CA) enable societies to be innovative and competitive and to achieve higher productivity and prosperity. However, does happiness enhance the effect of CA on economic growth? Our study views happiness as an intrinsic motivator that helps workers be more productive and get the most out of their CA. Regression analyzes using two different measures for CA showed strong evidence that CA generated economic growth from 1960 to 2017, even though it interacted negatively with happiness. These results were found to be robust after controlling for endogeneity bias using instrumental variable for happiness. In addition, the threshold regression analyses revealed significant evidence that the relationships between CAs and growth vary according to happiness levels. Two prominent ranges of threshold were established: γ1 = 4.75–4.96 and γ2 = 6.16–6.43 on the 0 to 10 happiness scale. Accordingly, the effects of CA were smallest in very unhappy countries (happiness

Suggested Citation

  • Nik Ahmad Sufian Burhan & Mohamad Fazli Sabri & Heiner Rindermann, 2023. "Cognitive ability and economic growth: how much happiness is optimal?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 70(1), pages 63-100, March.
    • Handle: RePEc:spr:inrvec:v:70:y:2023:i:1:d:10.1007_s12232-022-00409-0
    DOI: 10.1007/s12232-022-00409-0
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    More about this item

    Keywords

    Cognitive ability; Economic growth; Happiness; Human motivation; Savanna-IQ interaction hypothesis;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;

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