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Transferable quotas, enforcement costs and typical firms: An empirical application to the Norwegian trawler fleet

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Author Info

  • Kjell Salvanes
  • Dale Squires

Abstract

An alternative to traditional regulations of fisheries to avoid rent dissipation is the use of individual transferable quotas (ITQ s ) where prices in the quota market provide the necessary information to owners of harvest rights to contract with each other. However, even under such a decentralized regime, information on the underlying technology of the fishing vessels is also necessary. First, since most fisheries consist of many interrelated production processes, in order to avoid rent dissipation by discarding wrong output mix etc., the structure of production in the multispecies fishery must be known to design a proper quota system. Second, an ITQ system may create incentives for misreporting by understating the actual catch. This may especially be the case where the expected degree of self-enforcement is low. The paper proposes a way to reduce the information requirements under regulation with asymmetric information by constructing a typical firm and comparing performance for the other vessels to this firm. Based on the typical firm, and if the industry is relatively homogenous, the performance and hence catch of any other firm in the industry can be predicted within a certain range. Further, the paper applies this idea to the Norwegian trawler fleet to assess the production structure in terms of jointness, input-output separability, and the supply and demand elasticities for the fishing firms. This information characterizes the fishery and thus how the quota system may be designed and how to construct a yardstick in order to reduce the enforcement cost under a decentralized regulation of ITQs. Copyright Kluwer Academic Publishers 1995

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File URL: http://hdl.handle.net/10.1007/BF00691408
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

Volume (Year): 6 (1995)
Issue (Month): 1 (July)
Pages: 1-21

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Handle: RePEc:kap:enreec:v:6:y:1995:i:1:p:1-21

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: Transferable quotas; enforcement costs; profit functions;

References

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  1. Dupont, Diane P., 1990. "Rent dissipation in restricted access fisheries," Journal of Environmental Economics and Management, Elsevier, vol. 19(1), pages 26-44, July.
  2. E. Maskin & D. Fudenberg, 1984. "The Folk Theorem and Repeated Games with Discount and with Incomplete Information," Working papers 310, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Diane P. Dupont & Shelley A. Phipps, 1991. "Distributional Consequences of Fisheries Regulations," Canadian Journal of Economics, Canadian Economics Association, vol. 24(1), pages 206-20, February.
  4. Kandori, Michihiro, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 63-80, January.
  5. Grafton R. Quentin, 1995. "Rent Capture in a Rights-Based Fishery," Journal of Environmental Economics and Management, Elsevier, vol. 28(1), pages 48-67, January.
  6. Denny, Michael & Fuss, Melvyn A, 1977. "The Use of Approximation Analysis to Test for Separability and the Existence of Consistent Aggregates," American Economic Review, American Economic Association, vol. 67(3), pages 404-18, June.
  7. Ragnar Arnason, 1990. "Minimum Information Management in Fisheries," Canadian Journal of Economics, Canadian Economics Association, vol. 23(3), pages 630-53, August.
  8. Sakai, Yasuhiro, 1974. "Substitution and expansion effects in production theory: The case of joint production," Journal of Economic Theory, Elsevier, vol. 9(3), pages 255-274, November.
  9. Wales, Terence J., 1977. "On the flexibility of flexible functional forms : An empirical approach," Journal of Econometrics, Elsevier, vol. 5(2), pages 183-193, March.
  10. Denny, Michael & Pinto, Cheryl, 1978. "An Aggregate Model with Multi-Product Technologies," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 2, chapter 9 McMaster University Archive for the History of Economic Thought.
  11. Parzival Copes, 1986. "A Critical Review of the Individual Quota as a Device in Fisheries Management," Land Economics, University of Wisconsin Press, vol. 62(3), pages 278-291.
  12. Campbell, H. F., 1991. "Estimating the elasticity of substitution between restricted and unrestricted inputs in a regulated fishery: A probit approach," Journal of Environmental Economics and Management, Elsevier, vol. 20(3), pages 262-274, May.
  13. Squires, Dale, 1987. "Fishing effort: Its testing, specification, and internal structure in fisheries economics and management," Journal of Environmental Economics and Management, Elsevier, vol. 14(3), pages 268-282, September.
  14. Trond Bjørndal, 1989. "Production in a Schooling Fishery: The Case of the North Sea Herring Fishery," Land Economics, University of Wisconsin Press, vol. 65(1), pages 49-56.
  15. Barten, A. P., 1969. "Maximum likelihood estimation of a complete system of demand equations," European Economic Review, Elsevier, vol. 1(1), pages 7-73.
  16. Squires, Dale & Kirkley, James, 1991. "Production quota in multiproduct pacific fisheries," Journal of Environmental Economics and Management, Elsevier, vol. 21(2), pages 109-126, September.
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Cited by:
  1. Stage, Jesper, 2003. "Mixing Oil and Water. Studies of the Namibian Economy," UmeÃ¥ Economic Studies 611, Umeå University, Department of Economics, revised 19 Nov 2004.

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