Does Happiness Boost the Impact of Intelligence on Economic Growth

Previous studies have found that average cognitive ability at the national level, which has been called national intelligence and scaled as IQ, is an important determinant of economic growth at the cross-national level. The current study re-investigates the claim that being a happier society weakens the positive association between IQ and economic growth. It investigates whether there is a threshold effect of happiness on the relationship between national IQ and economic growth between 1960 and 2017. Controlling for endogeneity with instrumental variables (IVs), the results confirmed that the relationship between IQ and economic growth is weaker in countries with high levels of self-reported happiness. The diminishing returns of IQ for economic growth can be recognized above a threshold level of 6.25 on the zero-to-10 happiness scale. The suggested explanation is that higher levels of happiness tend to reduce the aspiration for higher productivity among the people, which reduces the impact of cognitive human capital on economic growth. Key Words: Intelligence; National IQ; Happiness; Economic growth; Threshold regression