Sovereign wealth funds and economic growth

Abstract

A synthetic control method in a comparative case study evaluates the potential effect of a sovereign wealth fund on the economic growth of a country. Trinidad and Tobago (T&T) is the focus of the case study. This is the first empirical research in the economic literature that attempts to evaluate the impact of a sovereign wealth fund on economic growth of an emerging economy. The results provide evidence that the fund contributed to a higher real per capita GDP of T&T by an estimate of $5104.57 (2010 US$) per year. The cumulative 30 years’ welfare impact of the fund is approximately $107,196 (2010 US$) per capita. Small island economies should consider implementing similar programs to foster economic growth.