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Regulating Renewable Resources under Uncertainty

Author

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  • Lars Gårn Hansen

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

Abstract

Renewable natural resources (like water, fish and wildlife stocks, forests and grazing lands) are critical for the livelihood of millions of people and understanding how they can be managed efficiently is an important economic problem. I show how regulator uncertainty about different economic and ecological parts of the harvesting system affect the optimal choice of instrument for regulating harvesters. I bring prior results into a unified framework and add to these by showing that: 1) quotas are preferred under ecological uncertainty if there are substantial diseconomies of scale in harvesting, 2) that a pro-quota result under uncertainty about prices and marginal costs is unlikely, requiring that the resource growth function is highly concave locally around the optimum and, 3) that quotas are always preferred if uncertainly about underlying structural economic parameters dominates. These results showing that quotas are preferred in a number of situations qualify the pro fee message dominating prior studies.

Suggested Citation

  • Lars Gårn Hansen, 2012. "Regulating Renewable Resources under Uncertainty," IFRO Working Paper 2012/3, University of Copenhagen, Department of Food and Resource Economics.
  • Handle: RePEc:foi:wpaper:2012_3
    as

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    File URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2012/WP_2012_3_regulating_renewable.pdf
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    References listed on IDEAS

    as
    1. Weitzman, Martin L., 2002. "Landing Fees vs Harvest Quotas with Uncertain Fish Stocks," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 325-338, March.
    2. Lars Gårn Hansen, 2008. "Prices versus Quantities in Fisheries Models: Comment," Land Economics, University of Wisconsin Press, vol. 84(4), pages 708-711.
    3. Lars G. Hansen & Frank Jensen & Clifford Russell, 2008. "The Choice of Regulatory Instrument When There Is Uncertainty About Compliance with Fisheries Regulations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 1130-1142.
    4. Frank Jensen & Niels Vestergaard, 2003. "Prices versus Quantities in Fisheries Models," Land Economics, University of Wisconsin Press, vol. 79(3), pages 415-425.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Frank Jensen & Lars Gårn Hansen, 2017. "The welfare gain from switching to tax regulation of fisheries," IFRO Working Paper 2017/07, University of Copenhagen, Department of Food and Resource Economics.

    More about this item

    Keywords

    Prices vs. quantities; renewable resource regulation;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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