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. That is, landings taxes can be used to address the ecological
consequences of fishing while using ITQs to address the open access stock externality.
Smith. M and Gopalakrishnan. S , ‘Combining property rights and taxes to mitigate the ecological impacts of fishing’, in the Proceedings of the International Institute of Fisheries Economics and Trade 2011.
Wednesday, June 1, 2011