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Efficiency Advantages of Grandfathering in Rights-Based Fisheries Management

Author

Listed:
  • Terry Anderson

    () (PERC, Bozeman Montana Hoover Institution, Bozeman, Montana 59718)

  • Ragnar Arnason

    () (Department of Economics, University of Iceland, 101 Reykjavik, Iceland)

  • Gary D. Libecap

    () (Bren School of Environmental Science and Management, University of California, Santa Barbara, California 93106
    National Bureau of Economic Research, Cambridge, Massachusetts 02138)

Abstract

We show that grandfathering fishing rights to local users or recognizing first possessions is more dynamically efficient than auctions of such rights. It is often argued that auctions allocate rights to the highest-valued users and thereby maximize resource rents. We counter that rents are not fixed in situ but rather depend additionally upon the innovation, investment, and collective actions of fishers, who discover and enhance stocks and convert them into valuable goods and services. Our analysis shows how grandfathering increases rents by raising expected rates of return for investment, lowering the cost of capital, and providing incentives for collective action.

Suggested Citation

  • Terry Anderson & Ragnar Arnason & Gary D. Libecap, 2011. "Efficiency Advantages of Grandfathering in Rights-Based Fisheries Management," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 159-179, October.
  • Handle: RePEc:anr:reseco:v:3:y:2011:p:159-179
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    2. Lynham, John, 2014. "How have catch shares been allocated?," Marine Policy, Elsevier, vol. 44(C), pages 42-48.
    3. Andreas Leibbrandt & John Lynham, 2017. "Does the Allocation of Property Rights Matter in the Commons?," Monash Economics Working Papers 04-17, Monash University, Department of Economics.
    4. José-María Da-Rocha & Jaume Sempere, 2017. "ITQs, Firm Dynamics and Wealth Distribution: Does Full Tradability Increase Inequality?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(2), pages 249-273, October.

    More about this item

    Keywords

    fishing rights; property rights; allocating fishing rights; grandfathering fishing rights; auctions of fishing rights; fisheries rent;

    JEL classification:

    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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