EconPapers    
Economics at your fingertips  
 

Minnesota—too late for a Sovereign Wealth Fund?

Christopher R. McIntosh (), Neil Wilmot, Adrienne Dinneen () and Jason Shogren ()
Additional contact information
Christopher R. McIntosh: University of Minnesota Duluth
Adrienne Dinneen: Lake Superior College

Mineral Economics, 2022, vol. 35, issue 1, No 6, 67-85

Abstract: Abstract Ten states have created natural-resource-based Sovereign Wealth Funds (SWF) to allow a fraction of the wealth derived from the extraction of non-renewable resources to be available for future use. Minnesota does not have a SWF, even though companies have been mining in the state for over 100 years. Herein, we present backward and forward-looking scenarios to estimate the potential magnitude of a “what-if” extraction-based fund. A 1.5% of value tax is suggested as an SWF funding mechanism. Based on historical extraction, prices, and investment returns, a large SWF could already exist. In the forward-looking section, we begin by econometrically estimating the supply and demand of US iron ore production to better understand how an increase in mining taxes would likely effect mining output (i.e., the production effect). After accounting for an estimated 4% production loss, results suggest enough minerals could still be extracted to create a permanent fund with between $930 million (US) and $1.6 billion dollars (US) in direct contributions by 2050 (depending on price). Using reasonable assumptions of a 2% inflation rate and a 5% annual investment return, the fund size could range from $3 billion to $5 billion by 2050.

Keywords: Sovereign Wealth Fund (SWF); Permanent natural resource trust fund; Intergenerational transfer; Production effect; Welfare estimates; Financial returns (search for similar items in EconPapers)
JEL-codes: O13 Q32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s13563-021-00258-3 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:minecn:v:35:y:2022:i:1:d:10.1007_s13563-021-00258-3

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/13563

DOI: 10.1007/s13563-021-00258-3

Access Statistics for this article

Mineral Economics is currently edited by Magnus Ericsson and Patrik Söderholm

More articles in Mineral Economics from Springer, Raw Materials Group (RMG), Luleå University of Technology
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2023-01-07
Handle: RePEc:spr:minecn:v:35:y:2022:i:1:d:10.1007_s13563-021-00258-3