IQ in the Utility Function: Cognitive Skills, Time Preference, and Cross-Country Differences in Savings Rates

22 Pages Posted: 8 Nov 2010

See all articles by Garett Jones

Garett Jones

George Mason University

Marta Podemska-Mikluch

Gustavus Adolphus College

Date Written: October 15, 2010

Abstract

Social science research has shown that intelligence is positively correlated with patience, while growth theory predicts that more patient countries will save more. In a closed economy, that means high average IQ countries will become more capital-intensive. In an open economy, high average IQ countries will hold a greater share of the world’s widely-traded assets. We provide the first empirical evidence that in today’s world, presumably somewhere between the closed-economy and open-economy benchmarks, both predictions hold true: Countries whose residents currently have the highest average IQs have higher capital-output ratios and higher ratios of U.S. Treasuries to nominal GDP.

Keywords: Ramsey, Time Preference, Intelligence, Human Capital, Savings

JEL Classification: E21, J24, O41

Suggested Citation

Jones, Garett and Podemska-Mikluch, Marta, IQ in the Utility Function: Cognitive Skills, Time Preference, and Cross-Country Differences in Savings Rates (October 15, 2010). Available at SSRN: https://ssrn.com/abstract=1704743 or http://dx.doi.org/10.2139/ssrn.1704743

Garett Jones (Contact Author)

George Mason University ( email )

Department of Economics
Center for Study of Public Choice
Fairfax, VA 22033
United States

HOME PAGE: http://mason.gmu.edu/~gjonesb

Marta Podemska-Mikluch

Gustavus Adolphus College ( email )

800 West College Ave.
Saint Peter, MN Mn 56082
United States
(507) 933-6120 (Phone)

HOME PAGE: http://www.podemska.com

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