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Iq In The Production Function: Evidence From Immigrant Earnings

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  • GARETT JONES
  • W. JOEL SCHNEIDER
Abstract
We show that a country’s average IQ score is a useful predictor of the wages that immigrants from that country earn in the United States, whether or not one adjusts for immigrant education. Just as in numerous microeconomic studies, 1 IQ point predicts 1% higher wages, suggesting that IQ tests capture an important difference in cross‐country worker productivity. In a cross‐country development accounting exercise, about one‐sixth of the global inequality in log income can be explained by the effect of large, persistent differences in national average IQ on the private marginal product of labor. This suggests that cognitive skills matter more for groups than for individuals. (JEL J24, J61, O47)

Suggested Citation

  • Garett Jones & W. Joel Schneider, 2010. "Iq In The Production Function: Evidence From Immigrant Earnings," Economic Inquiry, Western Economic Association International, vol. 48(3), pages 743-755, July.
    • Handle: RePEc:bla:ecinqu:v:48:y:2010:i:3:p:743-755
    DOI: 10.1111/j.1465-7295.2008.00206.x
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    References listed on IDEAS

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    Cited by:

    1. Burhan, Nik Ahmad Sufian & Salleh, Fauzilah & Burhan, Nik Mohd Ghazi, 2015. "National Intelligence and Private Health Expenditure: Do High IQ Societies Spend More on Health Insurance?," MPRA Paper 77328, University Library of Munich, Germany.
    2. Proto, Eugenio & Rustichini, Aldo & Sofianos, Andis, 2014. "Higher Intelligence Groups Have Higher Cooperation Rates in the Repeated Prisoner's Dilemma," IZA Discussion Papers 8499, Institute of Labor Economics (IZA).
    3. Oasis Kodila-Tedika & Julius Agbor, 2016. "Does Trust Matter for Entrepreneurship: Evidence from a Cross-Section of Countries," Economies, MDPI, vol. 4(1), pages 1-17, March.
    4. Potrafke, Niklas, 2012. "Intelligence and corruption," Economics Letters, Elsevier, vol. 114(1), pages 109-112.
    5. Burhan, Nik Ahmad Sufian & Kurniawan, Yohan & Sidek, Abdul Halim & Mohamad, Mohd Rosli, 2014. "Crimes and the Bell Curve: The Role of People with High, Average, and Low Intelligence," MPRA Paper 77314, University Library of Munich, Germany.
    6. R. Hafer & Garett Jones, 2015. "Are entrepreneurship and cognitive skills related? Some international evidence," Small Business Economics, Springer, vol. 44(2), pages 283-298, February.
    7. Oasis Kodila-Tedika, 2014. "Governance and Intelligence: Empirical Analysis from African Data," Journal of African Development, African Finance and Economic Association (AFEA), vol. 16(1), pages 83-97.
    8. Burhan, Nik Ahmad Sufian & Che Razak, Razli & Rosli, Muhamad Ridhwan & Selamat, Muhamad Rosli, 2017. "The Bell Curve of Intelligence, Economic Growth and Technological Achievement: How Robust is the Cross-Country Evidence?," MPRA Paper 77469, University Library of Munich, Germany.
    9. 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.
    10. Salahodjaev, Raufhon, 2015. "Intelligence and finance," MPRA Paper 68950, University Library of Munich, Germany.
    11. Burhan, Nik Ahmad Sufian & Che Razak, Razli & Salleh, Fauzilah & Labastida Tovar, María Elena, 2017. "Intelligence and the Ease of Doing Business: Does Intellectual Class Facilitate Leadership and Entrepreneurship?," MPRA Paper 77503, University Library of Munich, Germany.
    12. Burhan, Nik Ahmad Sufian & Che Razak, Razli & Selamat, Muhamad Rosli & Rosli, Muhamad Ridhwan, 2017. "Intellectual Giftedness for Leadership: How Robust is the Crime Reducing Effect of Intellectual Class?," MPRA Paper 77467, University Library of Munich, Germany.
    13. Morgan Kelly & Joel Mokyr & Cormac Ó Gráda, 2014. "Precocious Albion: A New Interpretation of the British Industrial Revolution," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 363-389, August.
    14. Garett Jones & Niklas Potrafke, 2014. "Human Capital and National Institutional Quality: Are TIMSS, PISA, and National Average IQ Robust Predictors?," CESifo Working Paper Series 4790, CESifo.
    15. Jones, Garett, 2012. "Cognitive skill and technology diffusion: An empirical test," Economic Systems, Elsevier, vol. 36(3), pages 444-460.
    16. Isaac Kalonda-Kanyama & Oasis Kodila-Tedika, 2012. "Quality of Institutions : Does Intelligence Matter?," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201206, University of Kansas, Department of Economics, revised Apr 2012.
    17. Antonio Rodríguez Andrés & Raufhon Salahodjaev, 2016. "Do cognitive able societies nurture entrepreneurs?," Economics Bulletin, AccessEcon, vol. 36(3), pages 1453-1462.
    18. Eugenio Proto & Aldo Rustichini & Andis Sofianos, 2019. "Intelligence, Personality, and Gains from Cooperation in Repeated Interactions," Journal of Political Economy, University of Chicago Press, vol. 127(3), pages 1351-1390.
    19. Jones, Garett, 2013. "The O-ring sector and the Foolproof sector: An explanation for skill externalities," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 1-10.
    20. Athanasios Lapatinas & Anastasia Litina, 2019. "Intelligence and economic sophistication," Empirical Economics, Springer, vol. 57(5), pages 1731-1750, November.
    21. Burhan, Nik Ahmad Sufian & Sidek, Abdul Halim & Kurniawan, Yohan & Mohamad, Mohd Rosli, 2014. "Has Globalization Triggered Collective Impact of National Intelligence on Economic Growth?," MPRA Paper 77316, University Library of Munich, Germany.
    22. Burhan, Nik Ahmad Sufian & Mohamad, Mohd Rosli & Kurniawan, Yohan & Sidek, Abdul Halim, 2014. "The Impact of Low, Average, and High IQ on Economic Growth and Technological Progress: Do All Individuals Contribute Equally?," MPRA Paper 77321, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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