Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Quota Enforcement and Capital Investment in Natural Resource Industries.
() and Linda Nøstbakken
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.; (follow links to similar papers)
JEL-Codes: Q20; Q22; Q28; (follow links to similar papers)
34 pages, August 15, 2015
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