A cross-country empirical test of cognitive abilities and innovation nexus

In this study we analyze the relationship between national cognitive abilities and innovational output using data from 124 countries of the world. By employing cross-country IQ scores traditionally used by psychological literature to represent national intelligence, and Economic Complexity Index as a novel measure of innovation, our study shows that there is a positive connection between them. We use a variety of tests to check the robustness of the nexus. Overall, our findings indicate that more intelligent nations export more sophisticated and diverse products to the world market and thus are more innovative. Therefore, developing countries should consider investing in human capital and related institutions if they are to boost innovative capabilities and move up the technology ladder in producing and exporting sophisticated and varied lines of products. This should bring them greater economic diversity which could be a right lever in mitigating negative external shocks.