Quality of institutions: Does intelligence matter?

This paper analyzes the effect of the average level of intelligence on different measures of the quality of institutions, using data on 164 countries, over the period from 2006 to 2010. The main finding is that average national intelligence, as a measure of human capital, positively affects four of the six measures of institutional quality we consider, namely control of corruption, government efficiency, regulatory quality and rule of law. The positive effect of intelligence is robust to controlling for other determinants of institutional quality. It follows that countries with higher levels of human capital enjoy institutions of better quality than countries with low levels. This finding should by no means be interpreted as evidence that there exist some countries with more intelligent populations that build better institutions and some other countries with less intelligent populations that build poor institutions. What our finding points out to is the fact that a countryʹs level of the understanding of the rules and principles that govern the institutions and the degree of cooperation of its human capital within national institutions is important for institutional quality.