Building a Fortune From the Ground Up A Simulation Study on Reinvesting LKAB:s Dividends Into a Sovereign Wealth Fund

Abstract

This study evaluates the potential benefits of establishing a sovereign wealth fund (SWF) in Sweden in 1988, using dividends from the state-owned mining company LKAB. Through two simulation scenarios, the study assesses the impact of the SWF on Sweden’s public balance sheet. The results indicate that both the ’Smoothed’ and ’Volatility’ SWF scenarios could have significant economic impact for Sweden, with values reaching 106.58 billion SEK and 112.79 billion SEK, respectively. Statistical significance in the Difference-in-Differences analysis strengthens the importance of these findings. The study suggests that establishing a SWF could offer long-term stability and economic benefits for Sweden, aligning with existing literature on SWFs and public balance sheets. Not creating a SWF in 1988 might have been a missed opportunity for Sweden, the study proposes that there is still potential to establish an impactful SWF in the future, thereby enhancing stability and wealth preservation over time. This research contributes to a deeper understanding of hypothetical SWFs and their implications for public balance sheets, laying the groundwork for future exploration in this area.