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Efficiency Gains and Cost Reductions from Individual Transferable Quotas: A Stochastic Cost Frontier for

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Tom Kompas
Tuong Nhu Che

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Abstract

In this paper efficiency gains and associated cost reductions from increases in traded quota are estimated with a stochastic cost frontier for the Australian South East Trawl Fishery (SETF). Estimation of this frontier also provides key information on the relative importance of input costs in the SETF, returns to scale, variations in costs as a result of trade in quota and the economic performance of each fishing vessel, year to year. Final estimations indicate that increases in the volume of quota traded have resulted in considerable efficiency gains and cost reductions in the SETF, ranging from 1.8 to 3.5 cents per kilogram for surveyed vessels for every one per cent increase in the volume of quota traded, or 1 to 2.4 per cent of total variable costs, with considerable gains also accruing to crew and skipper in the form of larger share payments. Mean vessel efficiency is relatively high in the SETF, estimated at over 90 per cent, and increases further to 92 per cent over the sample period with increased trades in quota.

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Paper provided by International and Development Economics in its series International and Development Economics Working Papers with number idec03-6.

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Length: 27 pages
Date of creation: 2003
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Handle: RePEc:idc:wpaper:idec03-6

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Find related papers by JEL classification:
Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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References listed on IDEAS
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  1. Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, vol. 13(1), pages 5-25, May. [Downloadable!] (restricted)
  2. Weninger, Quinn, 2002. "Assessing Efficiency Gains From Individual Transferable Quotas: An Application to the Mid-Atlantic Surf Clam and Ocean Quahog Fishery," Staff General Research Papers 5065, Iowa State University, Department of Economics.
  3. Grafton, R Quentin & Squires, Dale & Fox, Kevin J, 2000. "Private Property and Economic Efficiency: A Study of a Common-Pool Resource," Journal of Law & Economics, University of Chicago Press, vol. 43(2), pages 679-713, October.
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  4. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-48, September. [Downloadable!] (restricted)
  5. Dupont, Diane P. & Grafton, R. Quentin, 2000. "Multi-Species Individual Transferable Quotas: The Scotia-Fundy Mobile Gear Groundfishery," Marine Resource Economics, Marine Resources Foundation, vol. 15(3). [Downloadable!]
  6. Kalirajan, K P & Obwona, M B, 1994. "Frontier Production Function: The Stochastic Coefficients Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(1), pages 87-96, February.
  7. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July. [Downloadable!] (restricted)
  8. Schmidt, Peter & Knox Lovell, C. A., 1979. "Estimating technical and allocative inefficiency relative to stochastic production and cost frontiers," Journal of Econometrics, Elsevier, vol. 9(3), pages 343-366, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Blane Lewis, 2006. "Local government taxation: An analysis of administrative cost inefficiency," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 42(2), pages 213-233, August. [Downloadable!] (restricted)
  2. Felthoven, Ronald G. & Horrace, William C. & Schnier, Kurt E., 2006. "Estimating Heterogeneous Primal Capacity and Capacity Utilization Measures in a Multi-Species Fishery," 2006 Annual meeting, July 23-26, Long Beach, CA 21276, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  3. Ronald G. Felthovan & William C. Horrace & Kurt E. Schnier, 2006. "Estimating Heterogeneous Capacity and Capacity Utilization in a Multi-Species Fishery," Center for Policy Research Working Papers 86, Center for Policy Research, Maxwell School, Syracuse University. [Downloadable!]
    Other versions:
  4. Sanchirico, James & Holland, Daniel & Quigley, Kathryn & Fina, Mark, 2005. "Analysis of Flexibility Mechanisms for Quota-Catch Balancing in Multispecies Individual Fishing Quotas," Discussion Papers dp-05-54, Resources For the Future. [Downloadable!]
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