Prices and Quantities to Control Overfishing

Duke Environmental Economics Working Paper No. 11-07

26 Pages Posted: 9 Sep 2011

See all articles by Martin D. Smith

Martin D. Smith

Duke University - Nicholas School of the Environment

Sathya Gopalakrishnan

Duke University - Nicholas School of the Environment

Multiple version iconThere are 2 versions of this paper

Date Written: July 1, 2011

Abstract

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.

Keywords: Individually Transferable Quotas, landings taxes, fish life history, highgrading, size-selective harvesting

JEL Classification: Q22

Suggested Citation

Smith, Martin D. and Gopalakrishnan, Sathya, Prices and Quantities to Control Overfishing (July 1, 2011). Duke Environmental Economics Working Paper No. 11-07, Available at SSRN: https://ssrn.com/abstract=1925080 or http://dx.doi.org/10.2139/ssrn.1925080

Martin D. Smith (Contact Author)

Duke University - Nicholas School of the Environment ( email )

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HOME PAGE: http://fds.duke.edu/db/Nicholas/esp/faculty/marsmith

Sathya Gopalakrishnan

Duke University - Nicholas School of the Environment ( email )

Box 90328
Durham, NC 27708-0328
United States

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