ITQs, Firm Dynamics and Wealth Distribution: Does Full Tradability Increase Inequality?
- 428 Downloads
Concerns over the re-distributive effects of individual transferable quotas (ITQ’s) have led to restrictions on their tradability. We consider a general equilibrium model with firm dynamics to evaluate the redistributive impact of changing the tradability of ITQs. A change in tradability would happen, for example, if permits are allowed to be traded as a separate asset from ownership of an active firm. If the property right is associated with ownership of an active firm, the permit can be leased in each period but it is not possible to exit the industry and keep the right. However, allowing the permits to be traded as a separate asset has two effects. First, it leads to a greater concentration of production in the industry. Second, it directly converts a non-tradable asset into a tradable one, and this is equivalent to giving a lump sum transfer to all firms. The first effect implies a concentration in revenues, while the second implies a redistribution of wealth. We calibrate our model to match the observed increase in revenue inequality in the Northeast Multispecies (Groundfish) U.S. Fishery. We show that although observed revenue inequality—measured by the Gini coefficient—increases by 12 %, wealth inequality is reduced by 40 %.
KeywordsITQ Wealth distribution Firm dynamics Inequality Permit markets
- Arnason R (2002) A review of international experiences with ITQs: an annex to Future options for UK fish quota management. In: CEMAREGoogle Scholar
- Da-Rocha JM, Pujolas P (2011a) Policy distortions and aggregate productivity: the role of idiosyncratic shocks. BE J Macroecon 11(1)Google Scholar
- Da-Rocha JM, Pujolas P (2011b) Vessel dynamics, itq’s and endogenous vessels distributions. In: Simmons J et al (ed) Impact assessment of multi-annual plans for Southern hake, angler fish and Nephrops (STECF-11-06). EUR—Scientific and Technical Research series—ISSN 1831-9424 (online), ISSN 1018-5593 (print)Google Scholar
- Da-Rocha J-M, Tavares MM, Restuccia D (2014b) Policy distortions and aggregate productivity with endogenous establishment-level productivity. Working Paper, University of TorontoGoogle Scholar
- Da-Rocha J-M, Tavares MM, Restuccia D (2015) Firing costs, misallocation, and aggregate productivity. Working Paper, University of TorontoGoogle Scholar
- Diaz-Gimenez J, Glover A, Rios-Rull J (2011) Facts on the distributions of earnings, income, and wealth in the United States: 2007 update. Fed Reserve Bank Minneap Q Rev 34(1):2–31Google Scholar
- Dixit AK, Pindyck RS (1994) Investment under uncertainty. Princeton University Press, Princeton, NJGoogle Scholar
- Grainger C, Costello C (2015) The value of secure property rights: evidence from global fisheries. Working Paper 17019, NBER Working Papers SeriesGoogle Scholar
- Hannesson R (1996) Long-term industrial equilibrium in an ITQ managed fishery. Environ Resour Econ 8(1):63–74Google Scholar
- Kitts A, Bing-Sawyer E, Walden J, Demarest C, McPherson M, Christman P, Steinback S, Olson J, Clay P (2011) Final report on the performance of the northeast multispecies (groundfish) fishery. US Department of Commerce, Northeast Fish Science CenterGoogle Scholar