Efficiency Advantages of Grandfathering in Rights-Based Fisheries Management

Terry L. Anderson, Ragnar Arnason, Gary D. Libecap

NBER Working Paper No. 16519
Issued in November 2010
NBER Program(s):   DAE   EEE

We show that grandfathering fishing rights to local users or recognizing first possessions is more dynamically efficient than auctions of such rights. It is often argued that auctions allocate rights to the highest-valued users and thereby maximize resource rents. We counter that rents are not fixed in situ, but rather depend additionally upon the innovation, investment, and collective actions of fishers, who discover and enhance stocks and convert them into valuable goods and services. Our analysis shows how grandfathering increases rents by raising expected rates of return for investment, lowering the cost of capital, and providing incentives for collective action.

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Acknowledgments

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