DP15265 Cognitive Ability and Employee Mobility: Evidence from Swedish Microdata

Author(s): Pooyan Khashabi, Tobias Kretschmer, Ali Mohammadi, Joseph Raffiee
Publication Date: September 2020
Keyword(s): cognitive ability, cognitive distance, employee mobility, Managers, retention
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15265

Cognitive ability and intelligence have been highlighted as the primary personnel measures used for hiring decisions, and gurus and popular business outlets consistently recommend that managers hire people smarter than themselves. However, the sustainability of such hiring strategies with respect to employee retention has not been fully investigated, largely due to data constraints. In this research note, we examine the relationship between cognitive ability and employee mobility, taking advantage of unique microdata from Sweden. Our empirical results show that higher cognitive ability is negatively associated with turnover, implying that cognitively-gifted employees settle with better employment options internally, compared to the external labor market. Nevertheless, when the employee has a significantly higher cognitive ability than their manager , employees are more likely to the firm. The results shed light on the relationship between cognitive ability and mobility, and highlight the role of managers for the success of hiring strategies based on cognitive ability.