IQ and Economic Volatility

Abstract

Do countries with higher levels of national IQ have less volatile growth of real economic output compared with lower-IQ countries? This issue has not been addressed. Using a large sample of countries, a simple bivariate correlation indicates that IQ and economic volatility are negatively related. Estimating a regression model of volatility that includes IQ with a number of control variables, the estimated coefficient on IQ is consistently negative and significant. On average, a one-standard deviation increase in IQ is associated with about a 30 percent reduction in economic volatility. The evidence indicates that higher IQ countries have more stable economies.