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Quota Enforcement in Resource Industries: Self-Reporting and Differentiated Inspections

Author

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  • Lars Gårn Hansen

    () (Institute of Food and Resource Economics, University of Copenhagen)

  • Frank Jensen

    () (Institute of Food and Resource Economics, University of Copenhagen)

  • Linda Nøstbakken

    () (Alberta School of Business, University of Alberta)

Abstract

Quotas or permits are frequently used in the management of renewable resources and emissions. However, in many industries there is concern about the basic e ectiveness of quotas due to non-compliance. We develop an enforcement model of a quota-regulated resource and focus on a situation with signi cant non-compliance and exogenous constraints on nes and enforcement budget. We propose a new enforcement system based on self-reporting of excess extraction and explicit di erentiation of inspection rates based on compliance history. In particular, we use state-dependent enforcement to induce rms to self-report excess extraction. We show that such system increases the e ectiveness of quota management by allowing the regulator to implement a wider range of aggregate extraction targets than under traditional enforcement, while ensuring an ecient allocation of aggregate extraction. In addition, inspection costs can be reduced without reductions in welfare.

Suggested Citation

  • Lars Gårn Hansen & Frank Jensen & Linda Nøstbakken, 2010. "Quota Enforcement in Resource Industries: Self-Reporting and Differentiated Inspections," IFRO Working Paper 2010/10, University of Copenhagen, Department of Food and Resource Economics, revised May 2011.
  • Handle: RePEc:foi:wpaper:2010_10
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    References listed on IDEAS

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    Cited by:

    1. repec:kap:enreec:v:68:y:2017:i:2:d:10.1007_s10640-016-0017-3 is not listed on IDEAS
    2. Liu, Lirong & Neilson, William, 2013. "Enforcement Leverage with Fixed Inspection Capacity," Strategic Behavior and the Environment, now publishers, vol. 3(4), pages 305-328, August.
    3. 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

    Enforcement; Non-compliance; Self-reporting; Di erentiated inspections; Quotas; Emissions standards; Resource Management;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H0 - Public Economics - - General
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • 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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