Combining property rights and landings taxes to mitigate the ecological impacts of fishing

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.