Cognitive Human Capital and Economic Growth: Defining the Causal Paths

This study examines two key issues about the role of cognitive human capital (also known as intelligence) for economic growth between 1975 and 2009: (1) the measures of cognitive human capital that are most relevant to the prediction of economic growth; and (2) the proximate mechanisms through which this form of human capital promotes economic growth. We find that cognitive ability, measured as IQ or school achievement, robustly predicts economic growth on a worldwide scale. These two measures can be averaged into a single measure of “intelligence. ” In multivariate analyses that include a measure of cognitive ability, length of schooling is a poor predictor of economic growth. The growth-promoting effect of cognitive ability is mediated by multiple mechanisms, including lower fertility and greater technological competitiveness in developing countries, and increased domestic saving rate and reduced burden of infectious diseases in all countries. The main conclusion is that rising intelligence has been a major determinant of economic growth in the recent past. Key Words: Human capital; Economic growth; School achievement; Intelligence. Few economists doubt that the wealth of nations depends to a large extent on human capital, defined as the skills, attitudes and personality traits that people translate into economic activities. Less agreement exists about the best way of measuring human capital. Traditionally, human capital has been measured by the quantity or quality of education (e.g., Lutz, 2009). Measures of human capital that have been used in growth regressions include average years of schooling, school life expectancy, and enrollment in primary