New estimates on the relationship between IQ, economic growth and welfare

- Potential role of IQ as explanatory variable for economic welfare is tested.
- IQ is a robust predictor of welfare growth using large sample of countries.
- Results corroborate earlier work on GDP growth.

Previous research has found that there is a statistically significant, positive link between country-level IQ and various measures of aggregate production, such as GDP. This study extends that analysis by estimating the relationship between IQ and a new measure of economic welfare. Developed by Jones and Klenow (2016), welfare is not a measure of spending on public assistance programs, but a theory-based empirical construct combining several metrics of economic well-being. Using this new economic welfare index for a large sample of countries (74), we find that IQ is a statistically significant (5% or better) and economically important predictor of welfare growth. A one-point increase in IQ is associated with a 4% increase in welfare growth for the average country. Our results support the view that national IQ is an important determinant of cross-country differences in economic activity and welfare.