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IQ IN THE PRODUCTION FUNCTION: EVIDENCE FROM IMMIGRANT EARNINGS

Authors

  • GARETT JONES,

    1. Jones: Assistant Professor, Department of Economics and Center for Study of Public Choice, George Mason University, Fairfax, VA. Phone 314-973-7243, E-mail jonesgarett@gmail.com
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  • W. JOEL SCHNEIDER

    1. Schneider: Assistant Professor, Department of Psychology, Illinois State University, Normal, IL. Phone 309-438-8410, E-mail wjschne@ilstu.edu
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      We would like to thank participants at the Missouri Economics Conference, the Southern Economic Association meetings, the Society for Economic Dynamics, DEGIT XI, McGill University, and George Mason University for helpful comments. We especially thank Francesco Caselli, Michael Davis, William Smith, Petia Stoytcheva, Bryan Caplan, editor Vincenzo Quadrini, and an anonymous referee for particularly helpful recommendations, and the Graduate School of Southern Illinois University Edwardsville for financial support. An earlier version of this article circulated under the title “IQ in the Ramsey Model.” The usual disclaimer applies with particular force.


Abstract

We show that a country’s average IQ score is a useful predictor of the wages that immigrants from that country earn in the United States, whether or not one adjusts for immigrant education. Just as in numerous microeconomic studies, 1 IQ point predicts 1% higher wages, suggesting that IQ tests capture an important difference in cross-country worker productivity. In a cross-country development accounting exercise, about one-sixth of the global inequality in log income can be explained by the effect of large, persistent differences in national average IQ on the private marginal product of labor. This suggests that cognitive skills matter more for groups than for individuals. (JEL J24, J61, O47)

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