Intelligence, Human Capital, and Economic Growth: A Bayesian Averaging of Classical Estimates (Bace) Approach

Abstract

Human capital plays an important role in the theory of economic growth, but it has been difficult to measure this abstract concept. We survey the psychological literature on cross-cultural IQ tests and conclude that modern intelligence tests provide one useful measure of human capital. Using a new database of national average IQ [Lynn and Vanhanen, 2002] along with a methodology derived from Sala-i-Martin, Doppelhofer, and Miller [AER, 2004], we show that in growth regressions that include only robust control variables, IQ is statistically significant at the 95% level in 99.8% of these 1330 regressions, and the coefficient is always positive. IQ readily passes a variety of robustness tests based upon Bayesian model averaging. A 1 point increase in a nation's average IQ is associated with a persistent 0.11% annual increase in GDP per capita.

Keywords: Intelligence, Human Capital, IQ, Growth

JEL Classification: J24, O47, O40