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Pros And Cons Of Sovereign Wealth Funds

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SOVEREIGN WEALTH FUNDS
Historically countries whose wealth depended upon natural resources often ended up wasting their money when times were favorable for their economy and found themselves having to call drastic cuts when tables turned because most of the time they didn’t take in consideration that the prices might fall. However since 2008 economies have become more prudent and economically conscious about the instability of raw materials prices and most of them have started to save and ,in attempt to protect themselves from market shocks and break the resource curse by pouring their money in Sovereign wealth funds. A sovereign wealth fund (SWF) consists of pools of money derived from a country's reserves, set aside for investment purposes …show more content…

According to Corneo’s paper income inequality is mainly caused by three different factors …show more content…

Corneo’s proposal is to allow every citizen to benefit from the high rates of return generated by the market, by creating through the SWF a “social dividend” that would be a monthly transfer payment, that is the for every citizen and doesn’t depend on his income. This social dividend would be tax exempted and would consist of returns, net of administration costs and a reinvestment quota to stabilize the ratio of fund size to GDP in the long run. The SFW ,in the long run, would yield an above average return, therefore creating benefits even for those that have no financial means of their own, because ,as we have already said, each citizen would be an equal shareholder of the SFW. The social dividend would foster a better income distribution and reduce income inequality, even though its impact would not be as significant of that of a basic

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