Niels Vestergaard

Individual transferable quotas in multispecies fisheries

Dale Squires and Samuel F. Herrick, Jr are at the U.S. National Marine Fisheries Service, P.O. Box 271, La Jolla, California 92038-0271, USA. Harry Campbell is at the University of Queensland, Queensland, Australia. Stephen Cunningham and Sean Pascoe are at the University of Portsmouth, Portsmouth, UK. Christopher Dewees is at the University of California, Davis, Davis USA. R. Quentin Grafton is at the University of Ottawa, Ottawa Canada. James Kirkley is at the Virginia Institute of Marine Science, Gloucester, VA, USA. Sean Pascoe is also at the Australian Bureau of Agricultural and Resource Economics, Canberra, Australia. Kjell Salvanes is at the Norwegian School of Economics and Business Administration, Bergen, Norway. Bruce Shallard can be contacted at Bruce Shallard and Associates, New Zealand. Bruce Turris is at the Canada Department of Fisheries and Oceans, Vancouver, Canada. Niels Vestergaard is at the Danish Institute for Fisheries Economics Research, Esbjerg, Denmark.

Measuring capacity and capacity utilization in fisheries: the case of the Danish Gill-net fleet

Abstract Different measures of capacity and capacity utilization (CU) are estimated and examined for the multi-species Danish Gill-net fleet using a mathematical programming approach—data envelopment analysis (DEA). The potential capacity output is calculated using an output-orientated measure. CU is assessed using both a partial CU measure, which permits CU to be assessed relative to each output, and a ray measure. Based on the ray measure, the average CU for the Danish Gill-net fleet was estimated to be between 0.85 and 0.95. The partial CU measure for cod was determined to be approximately the same as the overall or ray CU measure, but the partial CU measure for plaice was less than the level of the ray measure, which indicated that the production of plaice could be increased by a higher proportion than could the production of cod. The optimal variable input utilization was also estimated. It was determined that, on average, the variable input—number of trips—could be increased by 27% compared to the optimal level. Results also indicated higher excess capacity for cod and sole than for other species, which is in accordance with how the fishery developed.

Moral hazard problems in fisheries regulation: the case of illegal landings and discard

This paper treats illegal landings and discards of fish as a moral hazard problem that arises from individual catches that are unobservable to society, and hence are private information. A tax/subsidy mechanism taking into account the asymmetric information problem is formulated as a solution to problems of illegal landings and discards. The incentive scheme uses fish stock size as the tax variable, and can be seen as an alternative to a control policy. Rough estimates from a simulation study suggest that the incentive scheme is potentially useful.

Technical Change and The Commons

This paper addresses normative exploitation of common renewable resources with changes in technology and technical, allocative, and scale efficiency that exacerbate the commons problem and externality. Their impact depends on the rate and nature of change, investment, and state of property rights. An augmented fundamental equation of renewable resources with a modified marginal stock effect and a new marginal technology effect account for changes in disembodied and embodied technology and technical efficiency. Neglecting these changes generates misleading policy advice and dynamic inefficiency with overaccumulation of physical and natural capital and sizable foregone rents. An empirical application illustrates.

Revenue-based capacity utilisation measures and decomposition: The case of Danish North Sea trawlers

In fisheries, capacity analysis has largely been limited to measuring physical capacity, defined as the maximum amount of output that can be produced per unit of time, given existing plant and equipment and unrestricted availability of variable inputs. An economic measure of capacity can be defined as the maximum revenue attainable for the given fixed inputs, using relevant outputs and output prices. This paper examines these two approaches to capacity by applying data envelopment analysis to physical and economic input/output data for Danish North Sea trawlers. The economic and physical measures are compared and contrasted using correlation analysis. An innovative analysis into the composition of possible revenue increments is also presented and reasons for economic inefficiency of vessels are identified.

Optimal Feedback Controls: Comparative Evaluation of the Cod Fisheries in Denmark, Iceland, and Norway

The economic efficiencies of the Danish, Icelandic, and Norwegian cod fisheries are examined. For this purpose, nonlinear aggregate models of these fisheries are constructed. Comparing the calculated optimal harvest and biomass quantities with the actual fisheries provides a measure of the degree of efficiency in these fisheries. The comparisons confirm that the cod harvesting policies of these countries have been hugely inefficient in the past. It appears that inefficiency has been increasing over the last three to four decades, even after TAC regulations replaced open access, indicating that the management policies adopted by all three countries have failed to cure overfishing. Copyright 2004, Oxford University Press.

Discard Behavior, Highgrading and Regulation: The Case of the Greenland Shrimp Fishery

A formal economic analysis of the discarding problem is presented, focusing on the individual fisherman and the effect of different regulations on the fishermans incentives to discard. It is shown that in a nonregulated fishery, either multispecies or single species/multisize, where the only constraints are the hold capacity and the length of the season, the fisherman may have rational incentives to discard/highgrade, if the marginal trip profit of an extra fishing day is greater than the average trip profit. Regulation by TAC does not change the incentives to discard. However, under INTQs and ITQs, the incentives to discard increase. The incentives to discard decrease under ITQs compared to INTQs, if the unit quota price is smaller than the shadow price of the quota. The model is applied to the Greenland shrimp fishery, where it demonstrates the reported discard behavior in the fishery. Finally, different regulations of discard are applied and discussed in the model. The analysis suggests that regulation of fishing days could be a promising alternative to usual suggested measures like tax/subsidies and landings obligations.

Prices versus Quantities in Fisheries Models

This paper discusses the conditions for generalizing the analysis in Weitzman (1974) to fisheries. It is shown that it is straightforward to generalize the analysis if the cost function is direct additively separable in stock size and catches. This leads to the conclusion that the analysis holds for a schooling fishery with and without search costs, but it might not hold for a search fishery. A further result is that for a schooling fishery without search costs, where the marginal cost function is steeper than the marginal benefit function, taxes are likely to be preferred over individual transferable quotas. (JEL Q22)

Sunk Cost and Entry-Exit Decisions under Individual Transferable Quotas: Why Industry Restructuring is Delayed

The paper shows that explicit modelling of sunk cost and a firm’s entry-exit decision in a traditional deterministic investment model may give an explanation of the slow transition to the optimal fleet structure following the introduction of individual transferable quotas (ITQs). The analysis shows that the annual lease unit price of quota may be in a range where the long-run fleet structure will not be attainable at once. Over time, firms with zero gross investment as optimal behavior may leave the industry as the capital decays and over the transition period the optimal fleet structure prevails. (JEL Q22)

Illegal Landings: An Aggregate Catch Self-Reporting Mechanism

To solve the problem of illegal landings this article proposes a new tax mechanism based on the regulators own aggregate catch estimates and ex ante self-reports of planned catch by fishermen. We show that the mechanism avoids illegal landings while ensuring (nearly) optimal exploitation and generating (nearly) correct entry and exit incentives. Finally we simulate the mechanism for the Danish cod fishery in Kattegat to obtain a rough indicator of the size of the tax. It turns out that the average tax payment as a percentage of profit is surprisingly low. Copyright 2006, Oxford University Press.