Micro Seminars EUR

Giacomo Corneo (Freie Universität Berlin, Germany)
Thursday, 11 October 2018

Abstract: The government of a country with a good financial reputation could borrow from the international capital market and use the proceeds to endow a sovereign wealth fund that mainly invests in the world stock market. In expectation, this country would gain the equity risk premium multiplied by the size of the fund. This gain could be earmarked to a social dividend. This paper deals with the conditions under which such a policy is welfare improving, discusses the optimal size of such a fund, and proposes an institutional framework for the management of public stock ownership.