Welfare effect of rent-seeking activities under international management of fishery resources

Abstract

Fishery resources face a depletion crisis due to accelerated international trade. Therefore, some countries have introduced local individual transferable quotas (ITQs). However, even if the government in a home country adequately manages fishery resources, fishers in a foreign country may overcatch fish because they can obtain allocation rent for the ITQ. If the home country actively imports marine products from foreign countries with allocation rent, the depletion of fishery resources could further accelerate. This leads to international political conflicts over fishery resource management. To address this problem, this study investigates the effect of quotas on welfare using a two-country model with a renewable resource as the fishery resource. The model considers a local ITQ market with rent seeking for the quotas. Opening up trade improves welfare in the foreign country, while the welfare effect in the home country depends on the degree of foreign rent-seeking activities. Under an international economy, welfare in the foreign country may increase by sufficiently decreasing resource firms' rent seeking via increased foreign quota levels. However, the policy decreases welfare in the home country because the total income falls due to a decrease in the domestic quota price. Therefore, the competition for increasing ITQs between governments may deplete fishery resources. This study thus suggests that a cooperative marine policy between governments is important for the international management of fishery resources.