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IQ in the Ramsey Model: A Naive Calibration

Author

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  • Garett Jones

    (Economics and Finance Southern Illinois University)

Abstract
I show that in a conventional Ramsey model, between one-fourth and one-half of the global income distribution can be explained by a single factor: The effect of large, persistent differences in national average IQ on the private marginal product of labor. Thus, differences in national average IQ may be a driving force behind global income inequality. These persistent differences in cognitive ability--which are well-supported in the psychology literature--are likely to be somewhat malleable through better health care, better education, and especially better nutrition in the world’s poorest countries. A simple calibration exercise in the spirit of Bils and Klenow (2000) and Castro (2005) is conducted. I show that an IQ-augmented Ramsey model can explain more than half of the empirical relationship between national average IQ and GDP per worker. I provide evidence that little of the IQ-productivity relationship is likely to be due to reverse causality.

Suggested Citation

  • Garett Jones, 2006. "IQ in the Ramsey Model: A Naive Calibration," 2006 Meeting Papers 213, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:213
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    References listed on IDEAS

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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

    Human Capital; Intelligence; IQ; Economic Growth;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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