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IQ in the Ramsey Model: A Naive Calibration

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  • Garett Jones

    (Southern Illinois University Edwardsville)

Abstract

I show that in a conventional Ramsey model, between one-fourth and one- half of income differences across countries can be explained by a single factor: The steady-state effect of large, persistent differences in national average IQ on worker productivity. These differences in cognitive ability--which are well-supported in the psychology literature--are likely to be malleable through better nutrition, better education, and better health care in the world’s poorest countries. A simple calibration exercise in the spirit of Bils and Klenow (2000) and Castro (2005) is conducted. According to the model, a move from the bottom decile of the global IQ distribution to the top decile will cause steady-state living standards to rise by between 75 and 350 percent. We provide evidence that little of IQ-productivity relationship is likely to be due to reverse causality.

Suggested Citation

  • Garett Jones, 2005. "IQ in the Ramsey Model: A Naive Calibration," Development and Comp Systems 0507004, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpdc:0507004
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    1. Garett Jones & W. Schneider, 2006. "Intelligence, Human Capital, and Economic Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," Journal of Economic Growth, Springer, vol. 11(1), pages 71-93, March.

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    More about this item

    Keywords

    Economic Growth; Intelligence; IQ; Ramsey.;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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