On the Pacific Salmon Treaty

Shenzhe Jiang and Yuzhe Zhang

The Economic Journal, 2020, vol. 130, issue 626, 489-510

Abstract: This article studies the optimal design of the Pacific Salmon Treaty, which was signed by the USA and Canada in 1999 to share salmon on the Pacific coast. Moral hazard exists because countries may steal from each other. If a country's observed output is suspiciously too high, the treaty either reduces the country's future share, or asks the country to make a monetary transfer to its opponent. A calibrated version of our model shows that it is optimal for the USA to pay Canada $328.93 million every 30.78 years. Switching to the optimal contract improves the total welfare by 1.55%.

Date: 2020
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