Cognitive skill and technology diffusion: An empirical test

Cognitive skills are robustly associated with good national economic performance. How much of this is due to high-skill countries doing a better job of absorbing total factor productivity from the world's technology leader? Following Benhabib and Spiegel (Handbook of Economic Growth, 2005), who estimated the Nelson–Phelps technology diffusion model, I use the database of IQ tests assembled by Lynn and Vanhanen, 2002, Lynn and Vanhanen, 2006 and find a robust relationship between national average IQ and total factor productivity growth. Controlling for IQ, years of education is of modest statistical significance. If IQ gaps between countries persist and model parameters remain stable, TFP levels are forecasted to sharply diverge, creating a “twin peaks” result. After controlling for IQ, few other growth variables are statistically significant.