When States Invests at Home: The Development Role of Sovereign Wealth Funds in Public Finance
Posted: 18 Dec 2017
Date Written: September 2, 2017
This article is a focused analysis of the economic rationale and institutional evolution of the role of sovereign wealth funds (SWFs) in promoting national economic development, transformation, and national competitiveness. The analysis is prompted by recent empirical evidence of a shift in the sovereign wealth paradigm from one based primarily on surpluses and reserves and focused on savings or stabilization functions to one focused on development and strategic transformation. The article presents a case for the state as an active agent in economic development based on failures in allocative efficiency of markets. It extends the analysis to also evaluate the impact of governmental or institutional barriers, particularly those that may inhibit flows of foreign capital to augment the state’s resources available for development. Thus informed, the article then identifies and features of SWF organization and governance, including those in practice, designed to overcome government failures in development finance transmitted through the public investment process.
Keywords: sovereign wealth, development fund, strategic investment fund, governance
JEL Classification: F21, F65, E61, G23, G24, O23, O16, O25
Suggested Citation: Suggested Citation