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Policy Change Anticipation in the Buyback Context

Author

Listed:
  • Barbara Hutniczak

    (University of Maryland Center for Environmental Science)

  • Niels Vestergaard

    (University of Southern Denmark)

  • Dale Squires

    (University of California San Diego)

Abstract

To what degree might an anticipated policy change delay the fleet restructuring process initiated by a vessel buyback? This paper addresses the issue by estimating a restricted profit function to analyze an overcapitalized fishing fleet subject to restrictive regulation on the harvest of its primary target species. Fishermen’s expectations and likely responses to the future regulations regarding individual quotas are modeled in the context of a time-limited buyback program. The Polish trawler fleet targeting primarily cod provides an application. Analyzing potential individual quota tradability, we find that considerable shifts in disinvestment are to be found due to anticipated policy change. The mechanisms driving discrepancies include capitalized value of quota, as well as the tradability option capitalized into other inputs with inelastic supply.

Suggested Citation

  • Barbara Hutniczak & Niels Vestergaard & Dale Squires, 2019. "Policy Change Anticipation in the Buyback Context," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(1), pages 111-132, May.
    • Handle: RePEc:kap:enreec:v:73:y:2019:i:1:d:10.1007_s10640-018-0252-x
    DOI: 10.1007/s10640-018-0252-x
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