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Environmental and Resource Economics

, Volume 64, Issue 4, pp 709–724 | Cite as

Using Taxes to Deter Illegal Fishing in ITQ Systems

  • Hugo SalgadoEmail author
  • Carlos Chávez
Article

Abstract

We study the effects of different tax schemes used in fisheries management in combination with an individual transferable quota system. We focus on the effects of taxes on equilibrium quota prices and on violations under the assumption that enforcement to induce compliance is imperfect and costly. The use of taxes is motivated by the regulator’s need to recover costs for enforcement activities. We propose the use of a tax on the price of the processed products based on its impact on violations and the information that is required to implement it. We also show that this tax has a double pay-off for enforcement because it reduces the demand for illegal fishing and increases revenue for enforcement activities without producing a deadweight loss in the quota market. We present an application of our model to the case of the red shrimp fishery in Chile. In our simulation example, a tax of 7 % on the price of fish exports could sufficiently reduce harvest demand and generate enough funding to completely eliminate quota violations, which, in the absence of taxes, can be more than 100 % of the total allowable catch. At the same time, this tax could increase the equilibrium quota price by 19 %.

Keywords

Taxes Enforcement Illegal fishing Individual transferable quotas 

JEL Classification

L51 Q22 Q28 

Notes

Acknowledgments

We thank two anonymous referees whose suggestions and comments have allowed us to improve the quality of the paper. We gratefully acknowledge partial funding received from the Scientific Millenium Initiative of the Chilean Ministry of Economics, Promotion and Tourism, under Project NS 100007 and from CONICYT/FONDAP/15110027. Chávez also gratefully acknowledges partial financial support from Conicyt-Chile under project Fondecyt No. 1110073. Salgado acknowledges that earlier research efforts for this paper were conducted while he was an Associate Professor at Departamento de Economía, Universidad de Concepción. We are also grateful to the language editing assistance provided to an early version of this paper by Jacy Brunkow from UCSB and to this final version by Cindy Berck from the Environment for Development Initiative.

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Copyright information

© Springer Science+Business Media Dordrecht 2015

Authors and Affiliations

  1. 1.Facultad de Economía y Negocios, Research Nucleus on Environmental and Natural Resource Economics (NENRE) and Interdisciplinary Center for Aquaculture Research (INCAR)Universidad de TalcaTalcaChile
  2. 2.Departamento de Economía, Research Nucleus on Environmental and Natural Resource Economics (NENRE) and Interdisciplinary Center for Aquaculture Research (INCAR)Universidad de Concepción Victoria 471, Barrio UniversitarioConcepciónChile

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