Production Efficiency and Exit in Rights-Based Fisheries

Kurt E. Schnier and Ronald G. Felthoven


Economic theory predicts that the least-efficient vessels are more likely to exit a fishery following the transition to an individual transferable quota (ITQ) management regime. Tools are needed to help analysts predict the likely degree and distribution of consolidation prior to implementing ITQ programs. This research utilizes a one-stage estimation procedure to determine the degree to which one’s technical inefficiency preceding an ITQ regime influences the likelihood of exiting. Our results indicate that a vessel’s measure of technical inefficiency is a significant and positive factor in explaining whether it exits the fishery following the implementation of ITQs. (JEL Q22)