IQ in the Ramsey Model: A Naive Calibration
AbstractI 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.
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Bibliographic InfoPaper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c011_063.
Length: 44 pages JEL Classification:
Date of creation: Jun 2006
Date of revision:
Other versions of this item:
- 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, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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