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 so doing, the country would expect to earn the equity risk premium multiplied by the size of the fund. These earnings could be earmarked for a social dividend. This chapter deals with the conditions under which such an approach would improve welfare, discusses the optimal size of such a fund, and proposes an institutional framework for the management of public stock ownership.
