The Production of Fishing Effort and the Economic Performance of Licence Limitation Programs

Anderson (1985) has demonstrated that fishery regulation by means of licence limitation may generate rents in a commercial fishery. He points out that, while restricting the amount of a major input used in the production of effort may increase the unit cost of effort, the reduction in the total amount of effort devoted to the fishery will yield a benefit through a shift of resources to higher value uses elsewhere. He argues that licence limitation programs should not be rejected out of hand because they increase the cost of fishing effort. Instead, the costs and benefits should be analyzed to determine whether the program can produce a net gain and, if so, at what level of the program the net gain is maximized. Such an optimum would of course be a second-best optimum as compared with that which could in theory be achieved by a sole owner. However, since the first-best optimum is likely to be unattainable in the practical world of fishery regulation, the relevant comparison is among the secondbest optima of a variety of policies. When the problem is posed in these terms it is clear that licence limitation programs should not be dismissed without proper analysis. There are two levels at which research can be conducted on licence limitation programs. One is at the level of the individual fishery involving collection of fishery-specific data and estimation of the rents which can be generated by licence limitation. Examples of this direction of research are provided by Campbell (1989) who estimates the welfare effects of a licence limitation program for the Tasmanian rock lobster fis ery, and Dupont (1988) who analyzes input substitution and rent dissipation in the British Columbia salmon fishery. At a more general level it may be useful to analyze how t characteristics of the production function for fishing effort under a licence limi tion program influence the capacity to generate rents equal to a significant proportion of the theoretical maximum. Fisheries in which uitable characteristics exist could then be the subject of detailed analysis to determine the extent of the optimal program. For fisheries which do not possess suitabl characteristics, an investigation of alternative methods of regulation is likely to prove more fruitful. The purpose of the prese t paper is to examine the influence of the parameters of the production function for effort on the likely net social benefits of licence limitation.