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IQ, Social Mobility and Growth

  • Hassler, John
  • Rodríguez Mora, José Vicente

Intelligent agents may contribute to higher technological growth if assigned appropriate positions in the economy. These positive effects on growth are unlikely to be internalized on a competitive labour market. The allocation of talent depends on the relative award the market assigns to intelligence versus other individual merits, which will also influence intergenerational social mobility. To illustrate this, we present an endogenous growth model where each agent can choose to be a worker or an entrepreneur. The reward to entrepreneurs is an endogenous function of the abilities they have been endowed by nature as well as of the amount of knowledge and other social assets they inherit from their parents. When growth is low, the equilibrium in the labour market implies that the reward to entrepreneurs depends more on social assets than on intelligence. This gives children of entrepreneurs a large ex-ante advantage over children of workers when working as entrepreneurs, which will cause low intergenerational social mobility and an inefficient allocation of human resources and, consequently, low growth. Conversely, there is also a stable equilibrium with high growth which mitigates the inefficiencies generated by the labour market and implies high intergenerational social mobility.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1827.

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Date of creation: Mar 1998
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Handle: RePEc:cpr:ceprdp:1827
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  1. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
  2. Thomas Piketty, 1994. "Social Mobility and Redistributive Politics," Working papers 94-15, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implications for Growth," NBER Working Papers 3530, National Bureau of Economic Research, Inc.
  4. Galor, Oded & Tsiddon, Daniel, 1996. "Technological Progress, Mobility, and Economic Growth," CEPR Discussion Papers 1413, C.E.P.R. Discussion Papers.
  5. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  6. Sjögren, Anna, 1998. "The Effects of Redistribution on Occupational Choice and Intergenerational Mobility: Does Wage Equality Nail the Cobbler to His Last?," SSE/EFI Working Paper Series in Economics and Finance 239, Stockholm School of Economics.
  7. Benabou, Roland, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 237-64, April.
  8. Charles I. Jones, 1997. "On the Evolution of the World Income Distribution," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 19-36, Summer.
  9. Baumol, William J, 1990. "Entrepreneurship: Productive, Unproductive, and Destructive," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 893-921, October.
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