Rent Capture in an Individual Transferable Quota Fishery

Abstract

The problem of capturing economic rent in a fishery regulated by an individual transferable quota scheme is addressed using a profit tax and a quota tax as two methods of rent collection. Using a theoretical model of a fishery with representative fishers employing different harvesting functions, the effects of the taxes are evaluated with respect to their ability to capture rent, flexibility to adjust to changes in the fishery, effects upon economic efficiency, the burden of taxation on different fishers, and ease of implementation. A quota tax is shown to be preferred over a comparable profit tax by those fishers who earn the highest average net returns on quota owned. A quota tax also has the potential to allow fishers to capture the full benefits of efficiency improvements. The profit tax can allow for greater risk sharing between the regulator and fishers and is able to capture the entire rent in the fishery in both the short and long run.