Cognitive ability and economic growth: how much happiness is optimal?

Nik Ahmad Sufian Burhan, Mohamad Fazli Sabri and Heiner Rindermann ()
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Nik Ahmad Sufian Burhan: Universiti Putra Malaysia
Mohamad Fazli Sabri: Universiti Putra Malaysia
Heiner Rindermann: Chemnitz University of Technology

International Review of Economics, 2023, vol. 70, issue 1, No 4, 63-100

Abstract: Abstract The cognitive human capital approach assumes that cognitive abilities (CA) enable societies to be innovative and competitive and to achieve higher productivity and prosperity. However, does happiness enhance the effect of CA on economic growth? Our study views happiness as an intrinsic motivator that helps workers be more productive and get the most out of their CA. Regression analyzes using two different measures for CA showed strong evidence that CA generated economic growth from 1960 to 2017, even though it interacted negatively with happiness. These results were found to be robust after controlling for endogeneity bias using instrumental variable for happiness. In addition, the threshold regression analyses revealed significant evidence that the relationships between CAs and growth vary according to happiness levels. Two prominent ranges of threshold were established: γ1 = 4.75–4.96 and γ2 = 6.16–6.43 on the 0 to 10 happiness scale. Accordingly, the effects of CA were smallest in very unhappy countries (happiness

Keywords: Cognitive ability; Economic growth; Happiness; Human motivation; Savanna-IQ interaction hypothesis (search for similar items in EconPapers)
JEL-codes: B52 E71 J24 O47 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s12232-022-00409-0

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