Delegation in sovereign wealth funds

Artur Grigoryan ()

International Review of Economics, 2015, vol. 62, issue 4, 363-380

Abstract: This paper models the incentives of a politician to delegate decision-making power in a sovereign wealth fund (SWF) to an independent external manager. I analyze in a repeated two-stage game whether the delegation is socially optimal and demonstrate under which circumstances it takes place. First, the politician decides whether to delegate. Second, based on his decision, two alternative subgames take place where output is produced and voters decide on reelection of the politician. I show that delegation increases the SWF’s output. Two effects matter: First, the conflict of interests between politician and manager disciplines both players and allows voters to mitigate their informational problem. Second, as a consequence of management outsourcing and higher transparency, the SWF’s average productivity improves. Less competent politicians are more willing to delegate as it improves their chances to be reelected. In general, the delegation is more likely if the quality of existing political and economic institutions is low. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: Sovereign wealth fund (SWF); Policy delegation; External management; Transparency; D7; D8; F3; G2 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1007/s12232-015-0232-1 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:inrvec:v:62:y:2015:i:4:p:363-380

Ordering information: This journal article can be ordered from
http://www.springer. ... cy/journal/12232/PS2

DOI: 10.1007/s12232-015-0232-1

Access Statistics for this article

International Review of Economics is currently edited by Luigino Bruni

More articles in International Review of Economics from Springer, Happiness Economics and Interpersonal Relations (HEIRS)
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().