Quota Enforcement and Capital Investment in Natural Resource Industries

Itziar Lazkano and Linda Nøstbakken

No 21/2015, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

Abstract: We investigate the relationship between quota enforcement, compliance, and Capital accumulation in ITQ regulated sheries. Over-extraction and over-capacity represent two of the main sheries management challenges, and we aim to model and analyze the two jointly. In a stylized resource model, quota violating and complying firms invest in capital, buy quotas, and choose their harvest. We show that in the short run, more capacity increases illegal extraction, while a well-functioning quota market partially alleviates this effect. We also show how tougher enforcement yields a double benefit by directly improving compliance, and by indirectly reducing incentives to invest in capacity, which improves future compliance. Our analysis thus contributes to the literature on market-based management of renewable resources.

Keywords: Compliance; Excess capacity; Enforcement; ITQs; Resource management. (search for similar items in EconPapers)
JEL-codes: Q20 Q22 Q28 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2015-08-15
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Related works:
Journal Article: Quota Enforcement and Capital Investment in Natural Resource Industries (2016)
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