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IQ in the Ramsey Model: A Naive Calibration

  • Garett Jones

    (Southern Illinois University Edwardsville)

I show that in a conventional Ramsey model, between one-fourth and one- half of income differences across countries can be explained by a single factor: The steady-state effect of large, persistent differences in national average IQ on worker productivity. These differences in cognitive ability--which are well-supported in the psychology literature--are likely to be malleable through better nutrition, better education, and better health care in the world’s poorest countries. A simple calibration exercise in the spirit of Bils and Klenow (2000) and Castro (2005) is conducted. According to the model, a move from the bottom decile of the global IQ distribution to the top decile will cause steady-state living standards to rise by between 75 and 350 percent. We provide evidence that little of IQ-productivity relationship is likely to be due to reverse causality.

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Paper provided by EconWPA in its series Development and Comp Systems with number 0507004.

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Length: 35 pages
Date of creation: 11 Jul 2005
Date of revision:
Handle: RePEc:wpa:wuwpdc:0507004
Note: Type of Document - pdf; pages: 35
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