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Implications of Entry Restrictions to Address Externalities in Aquaculture: The Case of Salmon Aquaculture

Author

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  • Atle Oglend

    (University of Stavanger)

  • Vesa-Heikki Soini

    (University of Stavanger
    Hanken School of Economics, Helsinki Graduate School of Economics)

Abstract

This paper investigates production license management when regulation constrains the number of production licenses to address production externalities. This is increasingly relevant for aquaculture production where disease issues threaten future seafood supply. The regulatory problem is analyzed in the context of Norwegian salmon aquaculture where a stop in issuance of new production licenses has been implemented to address social costs of parasitic sea lice. Our theoretical model shows that restricting number of licenses raises prices and shifts production efforts excessively towards greater stocking of fish per license. Hence, the policy cannot achieve a first-best welfare-maximizing allocation. Furthermore, restricting entry by limiting number of licenses can create regulatory rents, which effectively subsides rather than tax the source of the externality.

Suggested Citation

  • Atle Oglend & Vesa-Heikki Soini, 2020. "Implications of Entry Restrictions to Address Externalities in Aquaculture: The Case of Salmon Aquaculture," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(4), pages 673-694, December.
    • Handle: RePEc:kap:enreec:v:77:y:2020:i:4:d:10.1007_s10640-020-00514-0
    DOI: 10.1007/s10640-020-00514-0
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    References listed on IDEAS

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    Cited by:

    1. Oglend, Atle & Asche, Frank & Straume, Hans-Martin, 2024. "Rent formation and distortions due to quotas in biological production processes," Resource and Energy Economics, Elsevier, vol. 77(C).
    2. Estay, Manuel & Stranlund, John K., 2022. "Entry, location, and optimal environmental policies," Resource and Energy Economics, Elsevier, vol. 70(C).
    3. Frank Asche & Hans‐Martin Straume & Erling Vårdal, 2021. "Perish or prosper: Trade patterns for highly perishable seafood products," Agribusiness, John Wiley & Sons, Ltd., vol. 37(4), pages 876-890, October.
    4. Cojocaru, Andreea L. & Jensen, Frank & Misund, Bård & Nielsen, Rasmus & Pincinato, Ruth B. & Tveterås, Ragnar, 2024. "A flexible policy instrument to encourage externality abatement technologies in salmon aquaculture," Ecological Economics, Elsevier, vol. 224(C).

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    More about this item

    Keywords

    Regulations; Food production; Externalities;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery

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