Are catch share programs effective for the management of fisheries in developing countries? Ongoing research on major management programs in Peru and Chile is investigating the extent to which an individual vessel quota (IVQ) program that allows for quota transfers through the formation of associations can generate economic benefits while also potentially taking into account some of the governance issues associated with establishing effective property right regimes in a developing country context.
We focus here on the economic impacts of the Chilean jack mackerel management program; in a subsequent post we will discuss the Peruvian anchovy management program. In our analysis of the Chilean IVQ program, published as a working paper for the Inter-American Development Bank, we find that it has led to an increase in fishing profits.
Economists have had the chance to evaluate some fishery catch share programs implemented in the late 1970s and still in place today, including IVQ and ITQ (individual transferrable quota) programs, and have determined that well-designed quota programs can result in economic gains. (Programs where quota, or the right to fish a designated quantity of the stock, is assigned to and must remain with a vessel are known as IVQ programs. In ITQ programs, the quota is not tied to a vessel and can be transferred among participants.) Most previous analyses of IVQ and ITQ programs in fisheries have focused on those in developed countries, such as Iceland, New Zealand, Canada, and the United States, which were the first to implement such programs. More recently, developing countries have begun to design and implement similar programs to manage their fisheries.
However, a successful program for one fishery in one country may not be successful in another context. Achieving biological sustainability, increasing economic efficiency, and meeting social goals will depend on the particular species, the strength of government institutions and enforcement of fishing limits, cultural and economic pressures, and good science. The evolution of management program design in developed countries toward inclusion of a variety of fishery-specific socioeconomic goals should serve as a cautionary tale against exporting a particular program design to developing countries that may have varying socioeconomic conditions and goals. Therefore, it is important and timely to assess the design and performance of IVQ, ITQ, and other catch share management programs implemented in developing countries.
Two of the largest developing country fisheries, the Chilean jack mackerel and the Peruvian anchovy, are managed via programs where quota is assigned on a vessel-by-vessel basis, but some transfer of quota is allowed. Under the management structure in place for the Chilean and Peruvian fisheries, catch allocations are assigned to a vessel like in an IVQ program, but can be transferred within firms and through the creation of fishing associations. This association structure allows for potential changes to occur after program implementation similar to those under traditional ITQ programs; however, this program structure may slow or impede consolidation of vessels active in the fishery and reduce fishery profit compared to a traditional ITQ program.
We use data on the Chilean jack mackerel fishery to examine multiple economic performance margins, tracking the evolution of the fishery from the original limited entry management program to after the quasi-ITQ program was implemented. We explore the extent to which fishery consolidation occurs after the new management program is implemented and find evidence of consolidation, with the number of vessels decreasing to less than a third of the pre-program number by the fifth year of the program. This suggests allowances for within-firm transfers of quota and the formation of associations, through which quota can be transferred to vessels of other firms, appear to have provided sufficient flexibility for some quota trading to occur.
We also investigate vessel and trip characteristics, as well as trip costs and revenues. We estimate that the program led to a measureable increase in variable fishing profits, on the order of 22 percent to 35 percent of fishing revenue. Accompanying the increase was a movement toward higher value products, consolidation of catch on larger vessels, and vessels taking longer trips with greater catch per trip.
These results suggest that catch share programs can be successful in increasing the economic efficiency of fisheries in developing countries. Further research is needed to understand how alternative program designs, such as the firm and association trading provisions in this program, can affect economic efficiency, local community and labor force outcomes, and enforcement and monitoring of the fishery.