Public Investment Funds and Value-Based Generational Accounting

Governments in various countries are holding large pools of resources managed for public goals. These pools are known under different names, like sovereign wealth funds, public investment funds, pension funds, saving funds, intergenerational funds and so on, reflecting their different historical roots and orientation. Mitchell et al. (2008) make a distinction between three types of publicly held funds, or of public investment funds as they call these funds: (i) reserve funds held for currency stabilization and macroeconomic stabilization purposes; (ii) sovereign wealth funds (SWF) accumulated from natural resource taxes or from fiscal surpluses aimed at sharing the revenues of the exploitation of natural resources with future generations (Norway, Kuwait, Abu Dhabi); and (iii) public pension funds built up either through an explicitly funded arrangement or the result of prefunding the foreseeable increase in social security benefits because of ageing (Japan, Canada).