Does Intelligence Enhance Labor Productivity? Cross-Country Evidence
Total Page:16
File Type:pdf, Size:1020Kb
Social'Sciences'Research'Journal,'Volume'6,'Issue'4,'997115'(December'2017),'ISSN:'214775237' 99' ' Does Intelligence Enhance Labor Productivity? Cross-Country Evidence Prof.Dr. Cuneyt Koyuncu1 Doç.Dr. İsmail Hakkı İşcan2 Bilecik Şeyh Edebali Üniversitesi, Bilecik Şeyh Edebali Üniversitesi, İktisadi ve İdari Bilimler Fakültesi, İktisadi ve İdari Bilimler Fakültesi Besides the other existing determinants of labor productivity in the literature, intelligence level may play important role in the explanation of the productivity level of labor in a country. In order to empirically examine this hypothesis, this study explores the influence of intelligence level on labor productivity by using thirteen distinct labor productivity indicators. The sample contains 157 countries’ cross-section data covering the periods between 2000 and 2013. The primary finding of the study implies a strong and statistically significant positive association between intelligence and labor productivity level. This result remains valid in all models having thirteen different proxies as dependent variable for labor productivity. This finding implies that countries with higher intelligence level experience higher labor productivity level. Key Words: Intelligence, Productivity, Cross-Section Data, Univariate Estimation, Multivariate Estimation. Zeka İşgücü Verimliliğini Artırır mı? Kesit Veri Kanıtı Literatürdeki işgücü verimliliğinin mevcut belirleyicileri yanında zeka, bir ülkedeki emeğin verimlilik seviyesini açıklamada önemli bir faktör olarak rol oynayabilir. Bu hipotezi ampirik olarak incelemek için bu çalışma, on üç ayrı emek verimlilik göstergesi kullanarak zeka seviyesinin emek üretkenliği üzerindeki etkisini araştırmaktadır. Çalışmanın örneklemi, 2000-2013 yılları arası 157 ülkenin kesitsel verilerini içermektedir. Çalışmanın başlıca bulgusu, zeka ve işgücü verimliliği seviyesi arasında güçlü ve istatiksel olarak anlamlı pozitif bir ilişkiyi göstermektedir. Bu sonuç, çalışmada işgücü verimliliği için kullanılan on üç farklı yakınlığa sahip bağımlı değişken için tüm modellerde geçerliliğini korumaktadır. Bu bulgu, daha yüksek zeka seviyesine sahip ülkelerin daha yüksek işgücü verimliliği seviyesine sahip olduklarını göstermektedir. Anahtar Kelimler : Zeka, Verimlilik, Yatay Kesit Veri, Tek Değişkenli Tahmin, Çok Değişkenli Tahmin. Introduction Traditional economic theories, along with internal dynamics like the political and institutional quality for economic growth, emphasize the importance of external factors such as geographical and historical factors. According to the liberal approach based on Smith and Hayek, a country will prosper a lot more by realizing the optimal distribution of the capital and labor by the virtue of economic freedom in internal dynamics. Empirical studies reveal that economic freedom and the increase in this freedom will bring a high level of economic welfare (Eliot A. Jamison, Dean T. Jamison, Eric A. Hanushek 2007; Heiner Rindermann 2008). East Asian countries which have ensured economic development largely by state influence constitute an important exception. On the other hand, historical and geographical advantages of countries (e.g., natural resources, openness to overseas trade, climatic conditions etc.) are determinants of economic growth as well. Some authors regard geography as the basic reason of regional and national economic developmental difference (Douglas A. Hibbs and Ola Olsson 2004; William D. Nordhaus 2006). Gerhard Meisenberg and Richard Lynn (2011) exemplifying Japan as ''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' 1'Bilecik Şeyh Edebali Üniversitesi, İktisadi ve İdari Bilimler Fakültesi, İktisat Bölümü Öğretim Üyesi, [email protected] ' 2'Bilecik Şeyh Edebali Üniversitesi, İktisadi ve İdari Bilimler Fakültesi, İktisat Bölümü Öğretim Üyesi, [email protected]' Social'Sciences'Research'Journal,'Volume'6,'Issue'4,'997115'(December'2017),'ISSN:'214775237' 100' ' wealthy country and Nigeria as poor country state that some countries own more natural resources while some other countries are geographically closer to the world markets. In this sense, Nigeria is much richer than Japan in terms of natural resources and Japan is geographically quite far away to Europe's industrial centers. Therefore, Nigeria must be much richer than Japan. Meanwhile, institutional structuring in a society is brought about by individuals. Primary reasons for institutional quality and its economic consequences should be sought in physical, cognitive and behavioral characteristics of the human factor. In this respect, Japan is a rich, Nigeria yet is a poor country. Forasmuch as Japan (and countries like Singapore, Taiwan and New Zealand) possess “human capital” far more than Nigeria. The importance of human capital to a country is supported by the observation of big differences among the countries in terms of labor productivity (Meisenberg and Lynn 2011, p.422). Thus, the theories on human capital set forth that individuals’ competences and intelligence supremacies by means of the improvements in the technology constitute a key factor in determining a country's wealth (Heiner Rindermann and James Thompson 2011, p.754). Recent researches in economics and psychology show that the differences in mean national intelligence levels identified by IQ tests are a determinative factor in obtaining various national economic results. Various cross-country studies exhibit that the relationship between IQ and economic growth is actually strong. A well-defined psychological relation between the IQ and personal patience indicate high saving rates and top-tier institutional quality in the countries having high level of IQ average. It is proved via diverse methods of measurement that the countries with high levels of IQ average at the same time have a higher level of savings intensity (Garett Jones, 2011a). Importance of IQ in Economy IQ (Intelligence Quotient) is a special indicator that compares the performance of individuals through particular tests designed to identify and evaluate the differences in mental abilities (Nathan Brody 1999, p.19). Intelligence is dispersed unevenly throughout the countries and regions. In his study, Gerhard Meisenberg (2014) by using his own computed IQ averages puts forth the regional differences in terms of IQ averages around the world. Within this context, the IQ average is 70 at sub-Saharan Africa while it is 105 at Eastern Asia. Confucian Eastern Asia countries (China, Japan, South Korea, Taiwan, Hong Kong, Singapore) are the countries with the highest IQ performance. These are followed by the Protestant Europe, mostly Europe-originated countries that speak English as the main language, the Catholic Europe, formerly socialist bloc member Eastern Europe countries, and eventually, the former Soviet Union. Countries having mid-level IQ performance are the Latin American countries; the Middle Eastern countries including predominantly Muslim countries from Morocco to Pakistan (inclusive North Africa), Pacific Islands (excluding Australia and New Zealand) and the South & South-East Asian countries from India to Indonesia and Philippines. The region with the lowest IQ level is the sub-Saharan Africa (Meisenberg 2014, p.54-55). The findings of the empirical studies indicate that individuals who have a higher IQ level in a society bear the capacity of generating a higher level of national income and are more innovative. Hence individuals with a lower IQ level contribute less to the economic development. For instance, by a verifying study of the “Smart Fraction” theory which assumes that talented and superior intelligence individuals are specifically suitable for social development, Heiner Rindermann, Michael Sailer and James Thompson (2009) reveals that societies with lower IQ levels are less influent at technological progress and in creating national income. Similarly, in the analysis conducted for 90 countries, Rindermann and Social'Sciences'Research'Journal,'Volume'6,'Issue'4,'997115'(December'2017),'ISSN:'214775237' 101' ' Thompson (2011) specified three groups with respect to cognitive adequacy levels, namely being “low”, “medium” and “high”. They compare the influence of each group’s intellectual skills on the gross domestic product. In consequence of the study, the significance of cognitive talent for the country’s wealth was found at high levels. Moreover, cognitive skills of a group can put forward the quality of the political and economic institutions in a country. The study finds cognitive sources indispensable for the development of capitalism and economic wealth. Studies implemented on the subject show that national IQ levels are saliently linked with a quite large area. The article of Richard Lynn and Tatu Vanhanen (2012a) summarizes the conclusions reached by a set of studies conducted between 2002 and 2012 on the association between national IQ level and 244 subjects. Among those associated subjects which can be enumerated are the educational level, cognitive output, per capita income, economic growth, other various economic variables, crime, political institutions, health, demographic and sociological variables, geographic and climatic variables. Moreover, Garett Jones and W. Joel Schneider (2006) by implementing hundreds of growth regressions prove the close association between economic performance and national IQ levels. Even though the studies associating intelligence level with so many subjects (i.e., 244 subjects as indicated above) exist in the literature,