Cognitive Ability and Employee Mobility: Evidence from Swedish Microdata

Cognitive ability is often highlighted as key measure used for hiring decisions, 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. We examine the relationship between cognitive ability and employee mobility using microdata from Sweden. We find that higher cognitive ability is negatively associated with turnover, implying that cognitively-gifted employees settle with better employment options internally, compared to external opportunities. Nevertheless, when the employee has a higher cognitive ability than their manager, employees are more likely to exit the firm. This sheds light on the relationship between cognitive ability and mobility, and highlights the role of managers for the success of intelligence-based hiring strategies.