Individual Transferable Quota Markets under Illegal Fishing

The use of individual transferable quotas in fisheries has been considered an opportunity to achieve a given total allowable catch with a maximum social benefit. One of the assumptions used in obtaining that result is that the system is in perfect compliance. The presence of violations and the need for enforcement of tradable property rights systems in fisheries has not received much attention in the literature. The incidents of non-compliance, however, may affect the performance of transferable property rights-based fisheries in unexplored ways. In this paper, we adapt previous literature on enforcing emissions trading programs to analyze a positive model of fisherman behavior that operates under a perfectly competitive individual transferable quota system, while recognizing the opportunities for violations of quota holdings, given incomplete enforcement. Considering a poorly enforced, individual transferable quota system we are able to obtain a number of implications for the current and future equilibrium of the quota market, the time paths of the fishery, and the proper design of a policy rule on total allowable catch (TAC).     

Variable unit costs in an output-regulated industry: The Fishery

Departing from general cost theory of the firm and bioeconomic theory of the fishery, this study contributes with an empirical examination of how variable unit costs in a Norwegian demersal and pelagic fishery depend on output and the fish stock. The identification of the separate effects that the two factors have on costs is not common in the literature. Three Norwegian fleets fishing Norwegian spring spawning herring (Clupea Harengus) and five Norwegian fleets fishing Northeast Arctic cod (Gadus Morhua) are evaluated. The findings indicate that variable unit costs fall in output in both fisheries. The results also show that variable unit costs fall in fish stock in the demersal fishery, but with a stock elasticity of variable unit costs in absolute terms significantly less than 1. These results are of relevance to a manager seeking the optimal harvest rule and to understand fishermen's incentives when individual vessel quotas are reduced.     

Costs and Benefits of Bycatch Reduction Devices in European Brown Shrimp Trawl Fisheries

Discarding of juvenile fish is a wellrecognised problem in shrimp fisheries. In manycases, these fish are commercial species that,if not caught, could increase the productivityof other fisheries. In January 2003, Europeanlegislation was implemented by Member Statesrequiring all vessels fishing for brown shrimpto use selective trawls in order to minimisethe bycatch of other commercial species. Incomplying with the regulations, however, thecatch rate of the target species (the shrimp)is likely to be reduced. In this paper, we usea bioeconomic model to assess the impact ofbycatch reduction devices on fishing effort,catch and profitability in the European Crangon fisheries. The potential benefits (interms of higher future yields and consequentlyhigher profits) to the white-fish fisheries arealso estimated. From the model results, theregulation is expected to result in a netreduction in the profitability of the shrimpfishers. However, the benefits to thewhite-fish fishers is expected to more thanoffset this cost, resulting in an overall netbenefit.     

Boundary conditions for the sustainable use of major fish stocks in the Baltic Sea

The history of the management of Baltic fishery resources suggests that both biological and non-biological factors influence management decisions and that both types of information are essential for management which promotes sustainability. There is a direct link between the exploitation level and the risks for fishing as an economic activity due to fluctuations in the resource. This paper analyses the sustainability of the present catch levels of major Baltic fish stocks. By examining the rate of fishing mortality and recruitment variability, the possibility of sustaining present catch levels can be investigated. Current catch levels of Baltic cod and some salmon stocks are not sustainable whereas sprat and herring catches are. High rates of fishing mortality of cod and salmon may endanger stocks if a drop in the recruitment causes an increase of the fishing mortality rates in order to sustain short-term catches. By analysing the trade off between exploitation level and risk of stock decline, managers can obtain a basis for quota negotiations.     

Cost structure and capacity in the Norwegian pelagic fisheries

The parameters of the short-run cost function are estimated for three vessel types taking part in the Norwegian pelagic fisheries: purse seine vessels, trawlers, and coastal vessels. The generalized translog functional form is used. Estimates of returns to scale are calculated and the results indicate that there are substantial economies of scale in all vessel classes. It is further investigated whether excess capacity varies with vessel size and age. The analysis suggests increased quotas per vessel to avoid rent dissipation. With the total allowable catch given, the number of participating vessels must be reduced.     

THE BACKWARD-BENDING SUPPLY CURVE OF THE FISHING INDUSTRY1

Proceeding from an article by Gordon, published in 1954, the substance of an economic theory of the fisheries has emerged from the writings of a number of economists.² The theory has emphasized the common- property nature of the fishery resource, generally leading to an ‘over-exploitation’ that results in dissipation of the rent that the resource could yield.     

Optimal Management Under Institutional Constraints: Determining a Total Allowable Catch for Different Fleet Segments in the Northeast Arctic Cod Fishery

Many real world fisheries have an individual vessel quota system with restrictions on transferability of quota or entrance of new vessels into the fishery. While the standard economic reasoning is that these institutional constraints lead to welfare losses, the size of those losses and optimal second-best policies are usually unknown. We develop a dynamic bioeconomic model, in which a scientific body provides an optimal TAC given restrictions on (i) transferability between vessel segments and (ii) entrance of new vessels. Further, we also quantify welfare losses arising from not maximizing economic welfare, but physical yield—which is actually the case in many fisheries. We apply the model to the Northeast Arctic cod fishery, and estimate not only the cost and harvesting functions of the various vessel types, but also the parameters of the biological model as well as those of the demand function. This allows us to determine optimal second-best policies and quantify corresponding welfare effects for our case study fishery.     

Sustainable fisheries development in the tropics: trawlers and licence limitation in Malaysia

Sustainable fisheries development requires sound fisheries management. Area licence limitation programmes may form the cornerstone for most tropical multispecies fisheries management programmes. An empirical analysis of Peninsular Malaysian fishing trawlers is used to design an area licence limitation programme that conforms to the multiproduct production technology, and cost and revenue structures to best accommodate condtions of asymmetric information between the regulator and fishing vessels.     

Implications of a Discard Ban in Multispecies Quota Fisheries

We present an analysis of quota regulation and discarding in multispecies fisheries, explicitly taking into account the costs of non-compliance with quotas and a possible discard ban, as well as the costs of selective fishing (avoidance effort). We examine the impact of a discard ban on vessels’ profit maximising behaviour, in particular where species quotas are not set in proportion to their availability on the fishing grounds, considering both non-tradeable quotas and ITQs. We show the interdependence between penalty rates for both discards and over-quota landings in determining quota market outcomes. We find that quota prices are sensitive to penalty rates and to the presence of restrictive quotas for “choke” species.     

Endogenous Fishery Management in a Stochastic Model: Why Do Fishery Agencies Use TACs Along with Fishing Periods?

This paper seeks to explain the circumstances under which using total allowable catch (TAC) as an instrument to manage a fishery along with fishing periods may be of interest from a regulatory point of view. The deterministic analysis by Homans and Wilen (J Environ Econ Manag 32:1?C21, 1997) and Anderson (Ann Oper Res 94:231?C257, 2000) is thus extended to a stochastic scenario where the resource cannot be measured accurately. The resulting model is solved numerically to find the optimal control rules in the Iberian sardine stock. Three relevant conclusions can be highlighted from simulations: first, the greater the uncertainty regarding the state of the stock, the lower the probability of the fishery being closed before the end of the fishing period. Second, the use of TACs as a management instrument in fisheries that are already regulated by fishing periods leads to: (i) an increase in the optimal season length and harvests, especially for medium and high numbers of licences; (ii) improved biological and economic variables when the fleet is large; and (iii) extinction risk for the resource being eliminated. Third, the regulator would rather select the number of licences than restrict the season length.     

Optimal Harvest in an Age Structured Model with Different Fishing Selectivity

An age structured model of a fishery is studied where two fishing fleets, or fishing agents, are targeting two different mature age classes of the fish stock. The agents are using different fishing gear with different fishing selectivity. The model includes young and old mature fish that can be harvested, in addition to an age class of immature fish. The paper describes the optimal harvesting policy under different assumptions on the objectives of the social planner and on fishing selectivity. First, biomass yield is maximized under perfect fishing selectivity, second, equilibrium profit (rent) is maximized under perfect fishing selectivity, and third, equilibrium profit is maximized under imperfect fishing selectivity. The paper provides results that differ significantly from the standard lumped parameter (also surplus production, or biomass) model.     

Heterogeneous Response to Marine Reserve Formation: A Sorting Model approach

The bioeconomic impacts of spatial fisheries management hinge on how fishing vessels reallocate their effort over space. However, empirical studies face two challenges: heterogeneous behavioral responses and unobservable resource abundance. This paper addresses these two problems simultaneously by using an unusual data set and an estimation technique developed in the industrial organization literature. We apply the methods to location and species choices in the Gulf of Mexico reef-fish fishery. The models are used to explore spatial effort substitution in response to two marine reserves. Individual attributes from a survey of vessel captains are linked to each fisherman’s observed daily trip information to control for observable heterogeneity. Some unobservable abundance information is captured by location- and species-specific constants and estimated by contraction mapping. The empirical results confirm that there is significant heterogeneity in fishermen’s response to the formation of marine reserves. They also show that ignoring unobservable abundance information will lead to significant bias in predicting spatial fishing effort.     

Welfare Effects of Changing Technological Efficency in Regulated Open-Access Fisheries

Environmental and Resource Economics - Small-scale fisheries often operate under conditions of regulated open access; that is, the fishery is subject to natural or regulatory constraints on fishing...     

ITQ’s in Chile: Measuring the Economic Benefits of Reform

In 2001 an individual (operationally transferable) quota system was introduced for all the most important industrial fisheries in Chile. This system was put in place after years of declining stocks and over investment. In this paper we describe this reform and estimate related allocative efficiency benefits for the most important industrial fishery in the country, the southern pelagic fishery. Benefits were estimated using a bioeconomic model estimated using data for the 1985–2004 period. The estimated model was then used to generate simulated scenarios of the evolution of this fishery in a 20 year horizon with and without the ITQ system in place. The benefits of the reform can then be estimated by comparing the fishery’s costs in the scenarios with and without ITQs. This approach allows benefits to be estimated using more realistic counterfactual scenarios than just comparing the fishery before and after the reform. Estimated discounted net benefits reach US $166 million in the period 2001–2020. Fleet size fell from 149 active boats in 2000 to 57 in 2004 as a direct consequence of the reform. Among the interesting features of the Chilean experience is the way the political economy of the reform was facilitated by the prior introduction of de facto individual quotas within the framework of fishery experimental activities. When the authorities closed the southern pelagic fishery because of biological problems between 1997 and 2000, they organized ‘experimental’ fishing expeditions in which participant boats were given the right to fish a certain amount of resources per expedition. This pseudo quota system allowed fishermen to experience directly the benefits of individual quotas and that was instrumental to the political agreement leading to the reform. It is important to note that the Chilean southern industrial pelagic fishery has average catches of over 1.4 million tons a year, making it one of the largest fisheries in the world to be regulated by individual quotas.     

Long-term industrial equilibrium in an ITQ managed fishery

This paper discusses long-term equilibrium in a fishery managed by individual transferable quotas. Rising prices or falling capital costs become capitalized in a higher value of quotas, implying higher capital costs for holding quotas. This may in fact reduce the size of each firm and lead to more firms existing in long-term equilibrium. Resource rent taxation by letting firms lose a certain share of their quota holdings each year is discussed and shown to be neutral.     

Dissertation abstract: The experimental analysis of the political economics of fisheries governance

This dissertation focuses on the political economy of fisheries governance. The study develops a formal model of fisheries governance by combining the features of the common pool fishery and the political institution of lobbying; designs a laboratory fishery governance institution and conducts economic experiments to test the hypotheses derived from the formal model. Specifically, the study analyzes how fishing firms invest in efforts to influence fishery regulation and management through voluntary contribution lobbying. The study also analyses and compares contribution and effort behavior in the lobbying and the CPR using data from economic experiments. The results indicate that lobbying to change suboptimal fishery regulations was significantly below the subgame perfect equilibrium prediction and contributions to raise the cap were significantly different than contributions to lower the cap toward the social optimum. Study results show that subjects successfully lobbied to raise inefficiently low fishing quotas, but were unable to lobby to reduce inefficiently high fishing quotas. Detailed analysis of subjects’ contribution and effort behavior suggest that despite the interesting benefit-cost duality between pure public goods and CPRs, the pattern of cooperative behavior in these two social dilemma situations was different and the level of cooperation in the voluntary contribution lobbying experiment was lower than those reported in other public goods experiments. To provide external validity to these experimental findings, the study further analyzes and compares lobbying expenditures in the fishery sector with those in other natural resource industries using field data from the United States. A comparison of actual lobbying expenditures as percentage of valued added shows that lobbying effort in the U.S fishery sector is not significantly different than those in other natural resource industries such as mining and electric utility industries, but the pattern of lobbying is different. Whereas fishing firms lobby through associations or pressure groups, firms in other natural resource industries lobby unilaterally. This observation suggests that differences in industrial structure and incentives influence the pattern of lobbying and the lobbying behavior of firms across industries. The theoretical predictions derived from the formal model of fisheries governance are consistent with our experimental findings and with the field data on lobbying in the US fisheries sector. These findings suggest that heterogeneity drives rent-seeking activities in the US fisheries sector and that fishing firms attempt to circumvent political collective action problems by forming and lobbying through associations of stakeholders with relatively homogenous policy preferences. JEL Classification D22, D72, D78, H41 Advisor: Prof. Jon G. Sutinen     

Enjoying Catch and Fishing Effort: The Effort Effect in Recreational Fisheries

Recreational fishermen derive utility from catch and fishing effort. Building our analysis on the Gordon-Clark model for renewable resources, we show that a lower importance of catch may result in higher catches. While this effect also holds under first-best management, it may destabilize open-access recreational fisheries to the point of stock collapse. Technical progress in recreational fisheries may mask such dynamics as it enables unaltered angler behavior and constant catches during stock declines.     

Fishing Revenue, Productivity and Product Choice in the Alaskan Pollock Fishery

A key element in evaluating fishery management strategies is examining their effects on the economic performance of fishery participants, yet nearly all empirical studies of fisheries focus exclusively on the amount of fish harvested. The economic benefits derived from fish stocks involve the amount of revenue generated from fish processing, which is linked to both the way fish are harvested and the products produced from the fish. In this study we econometrically estimate a flexible revenue function for catcher-processor vessels operating in the Alaskan pollock fishery, recognizing potential endogeneity and a variety of fishing inputs and conditions. We find significant own-price supply responses and product substitutability, and enhanced revenues from increased fishing days and tow duration after a regulatory change introduced property rights through a new fishing cooperative. We also find significant growth in economic productivity, or higher revenues over time after controlling for observed productive factors and price changes, which exceeds that attributable to increased harvest. These patterns suggest that the move to rights-based management has contributed significantly to economic performance in the pollock fishery.     

Species diversity, fishing induced change in carrying capacity and sustainable fisheries management

It is well established in the fisheries management literature that marine ecosystems are complex and marine species depend on one another. As a result, it is important to account for species diversity to ensure sustainable management. In addition, recent research published in the marine sciences literature has provided unequivocal evidence that fishing activities destroy habitats and inhibit production of planktons. This paper illustrates that if a conventional bioeconomic model is employed, an optimum effort policy as opposed to quota appears to result in sustainable management even if fishing impacts carrying capacity. However, the so-called optimum effort may collapse the stock if species diversity is not accounted for. Conversely, if species diversity and the impact of fishing on carrying capacity are considered, neither the equilibrium quota nor effort may guarantee sustainable yield.     

International Management Strategies for a Straddling Fish Stock: A Bio-Economic Simulation Model of the Norwegian Spring-Spawning Herring Fishery

In this paper, a three-country dynamic bio-economic simulation model is presented for the spring-spawning herring fishery. The international spring-spawning herring fishery, based on potentially one of the most valuable fish stocks in the world, is currently recovering from a severe depletion of the stock and subsequent harvesting moratorium. Management of the herring fishery is complicated by its multi-nation exploitation, due to the highly migratory behaviour of the species moving between several coastal state zones (exclusive economic zones, EEZs) and the high seas (Ocean Loop). Based on extensive work invested on analysing both the biology of the herring stock and the fisheries economics around its exploitation we study here the profiles of different multi-agent management schemes, simulating catch levels, stock size and profit potentials of alternative management strategies. The stock dynamics are described by a linear discrete-time age-structured population model and the economics are presented by a rent maximising model with constant price of herring catch and different costs of harvesting and efficiency levels for the different national fleets. The simulations, carried out over several decades, show that the benefits of international co-operation far exceed the returns of a competitive open access fishery.JEL Classifications: C7, C15, Q22