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The welfare gain from switching to tax regulation of fisheries

Author

Listed:
  • Frank Jensen

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

  • Lars Gårn Hansen

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

Abstract

Theoretical papers find that taxes are preferred over individual transferable quotas (ITQs) when fisheries regulators are uncertain about either biological growth or the extent of non-compliance with regulations. However, the size of the welfare gain from switching to taxes has not previously been investigated empirically. Based on estimated profit and growth functions, we simulate this gain for the Danish cod fishery in the Kattegat and find a welfare gain of less than 2%. We also develop a simple indicator which can be used to approximate the welfare gain of switching to tax regulation for other fisheries. The value of the indicator is calculated for a number of fisheries worldwide for which the necessary data have been published and we find that the gain from a switch to taxes is typically between 1.5% and 2.5% (in no case greater than 4.2%). We, therefore, conclude that the switch to tax regulation of fisheries, which has been recommended in prior theoretical literature, is of little practical importance.

Suggested Citation

  • 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.
    • Handle: RePEc:foi:wpaper:2017_07
    as

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    File URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2017/IFRO_WP_2017_07.pdf
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    References listed on IDEAS

    as
    1. Lars Gårn Hansen, 2012. "Regulating Renewable Resources under Uncertainty," IFRO Working Paper 2012/3, University of Copenhagen, Department of Food and Resource Economics.
    2. Staffan Waldo & Frank Jensen & Max Nielsen & Hans Ellefsen & Jónas Hallgrimsson & Cecilia Hammarlund & Øystein Hermansen & John Isaksen, 2016. "Regulating Multiple Externalities: The Case of Nordic Fisheries," Marine Resource Economics, University of Chicago Press, vol. 31(2), pages 233-257.
    3. Hoel, Michael & Karp, Larry, 2001. "Taxes and quotas for a stock pollutant with multiplicative uncertainty," Journal of Public Economics, Elsevier, vol. 82(1), pages 91-114, October.
    4. Hoel, Michael & Karp, Larry, 2001. "Taxes and quotas for a stock pollutant with multiplicative uncertainty," Journal of Public Economics, Elsevier, vol. 82(1), pages 91-114, October.
    5. Jensen, Frank, 2008. "Uncertainty and asymmetric information: An overview," Marine Policy, Elsevier, vol. 32(1), pages 89-103, January.
    6. Andersen, Peder, 1982. "Commercial fisheries under price uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 9(1), pages 11-28, March.
    7. Frank Jensen & Niels Vestergaard, 2003. "Prices versus Quantities in Fisheries Models," Land Economics, University of Wisconsin Press, vol. 79(3), pages 415-425.
    8. Lars Gårn Hansen, 2008. "Prices versus Quantities in Fisheries Models: Comment," Land Economics, University of Wisconsin Press, vol. 84(4), pages 708-711.
    9. Kateregga, Eseza & Sterner, Thomas, 2008. "Lake Victoria Fish Stocks and the Effects of Water Hyacinths on the Catchability of Fish," RFF Working Paper Series dp-08-05-efd, Resources for the Future.
    10. 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.
    11. Jensen, Frank & Vestergaard, Niels, 2002. "Moral hazard problems in fisheries regulation: the case of illegal landings and discard," Resource and Energy Economics, Elsevier, vol. 24(4), pages 281-299, November.
    12. Costello, Christopher J & Deacon, Robert T, 2007. "The Efficiency Gains from Fully Delineating Rights in an ITQ Fishery," University of California at Santa Barbara, Economics Working Paper Series qt56n8x9qb, Department of Economics, UC Santa Barbara.
    13. Koenig, Evan F., 1984. "Controlling stock externalities in a common property fishery subject to uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 11(2), pages 124-138, June.
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    Keywords

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    JEL classification:

    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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