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On Efficiency of Individual Transferable Quotas (ITQs) through Reduction of Vessels

  • Keisaku Higashida

    ()

    (School of Economics, Kwansei Gakuin University)

  • Yasuhiro Takarada

    ()

    (Faculty of Policy Studies, Nanzan University)

This paper theoretically examines whether an individual transferable quotas (ITQs) regime can achieve the long-run efficiency through the reduction of vessel numbers. Assuming the existence of two types of vessels in terms of their scales, we consider not only quota transactions but also the exit of fishers. Changes in vessel sizes of incumbent fishers are also taken into consideration. We find that when large-scale vessels are more efficient than small-scale vessels, the long-run efficiency is achieved only with an ITQ regime. However, when small-scale vessels are more efficient than large-scale vessels, the long-run efficiency is not achieved; the number of vessels becomes too few compared to when the total harvesting cost is minimized.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp68.pdf
File Function: First version, 2011
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Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 68.

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Length: 30 pages
Date of creation: Jan 2011
Date of revision: Jan 2011
Handle: RePEc:kgu:wpaper:68
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  1. Kerr, Suzi & Sanchirico, James & Newell, Richard, 2002. "Fishing Quota Markets," Discussion Papers dp-02-20, Resources For the Future.
  2. Weninger, Quinn & Just, Richard E., 2002. "Firm Dynamics with Tradable Output Permits," Staff General Research Papers 10831, Iowa State University, Department of Economics.
  3. Weninger, Quinn, 2004. "Economic Benefits of Management Reform in the Gulf of Mexico Grouper Fishery: A Semi-Parametric Analysis," Staff General Research Papers 11178, Iowa State University, Department of Economics.
  4. Claire Armstrong, 2008. "Using history dependence to design a dynamic tradeable quota system under market imperfections," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 39(4), pages 447-457, April.
  5. Spulber, Daniel F., 1985. "Effluent regulation and long-run optimality," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 103-116, June.
  6. Anderson, Lee G., 1991. "A note on market power in ITQ fisheries," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 291-296, November.
  7. Brandt, Sylvia, 2007. "Evaluating tradable property rights for natural resources: The role of strategic entry and exit," Journal of Economic Behavior & Organization, Elsevier, vol. 63(1), pages 158-176, May.
  8. Weninger, Quinn, 1998. "Assessing Efficiency Gains From Individual Transferable Quotas: An Application to the Mid-Atlantic Surf Clam and Ocean Quahog Fishery," Staff General Research Papers 5065, Iowa State University, Department of Economics.
  9. Jesper Levring Andersen & Peter Bogetoft, 2007. "Gains from quota trade: theoretical models and an application to the Danish fishery," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 34(1), pages 105-127, March.
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