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Quota Enforcement and Capital Investment in Natural Resource Industries

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  • Lazkano, Itziar

    (University of Wisconsin-Milwaukee)

  • Nøstbakken, Linda

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

Abstract

We investigate the relationship between quota enforcement, compliance, and Capital accumulation in ITQ regulated sheries. Over-extraction and over-capacity represent two of the main sheries management challenges, and we aim to model and analyze the two jointly. In a stylized resource model, quota violating and complying firms invest in capital, buy quotas, and choose their harvest. We show that in the short run, more capacity increases illegal extraction, while a well-functioning quota market partially alleviates this effect. We also show how tougher enforcement yields a double benefit by directly improving compliance, and by indirectly reducing incentives to invest in capacity, which improves future compliance. Our analysis thus contributes to the literature on market-based management of renewable resources.

Suggested Citation

  • Lazkano, Itziar & Nøstbakken, Linda, 2015. "Quota Enforcement and Capital Investment in Natural Resource Industries," Discussion Paper Series in Economics 21/2015, Norwegian School of Economics, Department of Economics.
    • Handle: RePEc:hhs:nhheco:2015_021
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    2. José-María Da-Rocha & Javier García-Cutrín & Raul Prellezo & Jaume Sempere, 2017. "The social cost of fishery subsidy reforms," Serie documentos de trabajo del Centro de Estudios Económicos 2017-02, El Colegio de México, Centro de Estudios Económicos.

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    More about this item

    Keywords

    Compliance; Excess capacity; Enforcement; ITQs; Resource management.;
    All these keywords.

    JEL classification:

    • 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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