Prices and Quantities to Control Overfishing
Martin D. Smith
Duke University - Nicholas School for the Environment; Duke University - Department of Economics
Duke University - Nicholas School for the Environment
July 1, 2011
Duke Environmental Economics Working Paper No. 11-07
Economists have long promoted fishery rationalization programs, but ITQs may fail to address the ecological consequences of fishing. Of particular concern is that economic incentives to harvest larger fish (due to size-dependent pricing or quota-induced discarding) can destabilize fish populations or lead to evolutionary changes. A substantial theoretical literature in economics has explored incentive problems in ITQ fisheries but has treated highgrading as part of the stock externality. We provide an alternative viewpoint in that the stock externality and the size-based incentives are two distinct externalities and thus require two distinct policy instruments. In this paper, we show that if managers know the price-by-size distribution and the size distribution of the population, total revenues and total catch (in weight) by vessel are sufficient statistics to design a schedule of revenue-neutral individualized landings taxes that eliminate the incentive to highgrade in an ITQ fishery. Landings taxes can be used to address the ecological consequences of fishing while using ITQs to address the open access stock externality.
Number of Pages in PDF File: 26
Keywords: Individually Transferable Quotas, landings taxes, fish life history, highgrading, size-selective harvesting
JEL Classification: Q22working papers series
Date posted: September 9, 2011
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