IQ in the Utility Function: Cognitive Skills, Time Preference, and Cross-Country Differences in Savings Rates

Risk aversion, patience and intelligence: Evidence based on macro data

“…Scholars use macro data to examine correlates of nations' intelligence quotients. Potrafke (2012) proposed that there is less corruption in societies with high-IQ populations because more intelligent people have longer time horizons, a common finding in psychology and economics (Shamosh andGray 2008, Jones andPodemska 2010). 3 Many of the hypotheses examined with macro data are based on results psychologists and economists arrived at by using micro-data.…”

IQ and National Productivity

“…Even controlling for income, years served, age, education, and many other factors, scores on an enlisted person's Armed Forces Qualifying Test was a statistically significant, correctly-signed predictor of one's likelihood of accepting the attractive annuity (Warner and Pleeter 2001). Jones and Podemska (2010) convert these estimates of the relationship between cognitive skill and time preference into a parameter, dρ/d(IQ). Their benchmark estimate is that one IQ point lowers the discount rate by 5 basis points.…”

“…But as barriers to international finance have fallen in recent decades, then one might expect the world to move, if not entirely to the Barro/Sala-i-Martin steady state, at least in that direction. Jones and Podemska (2010) claim that for many countries, holdings of U.S. Treasuries, a liquid form of wealth, are one indicator of whether a nation is building up its stock of global savings. Omitting a few offshore banking havens and OPEC countries, they find that high LV IQ countries hold a disproportionate share of U.S. Treasuries as a share of their nation's GDP: High LV IQ countries have high Treasury/GDP ratios, a result that holds after controlling for GDP per capita.…”

“…The Treasury/GDP ratio is an imperfect index of global saving; they are gross measures, not net. If nations with high Treasury/GDP ratios also were massive net borrowers, the Jones and Podemska (2010) result could be completely overturned. Fortunately holdings of net foreign assets are also available, with annual data from 1970 to 2004 Milesi-Ferretti, 2004, 2007).…”