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Áhaldandi óeffisient útluting í smáum tilfeingistreytaðum búskapum


Hermann Oskarsson

Søgu- og Samfelagsdeildin, Fróðskaparsetur Føroya

Stuðul úr Granskingargrunninum:
340.000 kr.

Fishing and fish processing accounts for a substantial part of the economic activity in the Faroe Islands: Fish produce is the only substantial merchandise export, comprising more than 95% of the total export value, and 15% of total employment is in fishing and the fishing industry, which together account for 20 % of GDP.
Even though it is so crucially important to this small island economy, fishing is an underperforming industry because of inadequate action in two respects:

First, due to lack of adherence to sensible depletion plans the stocks are overexploited
Second, because of inefficiently high costs and poor use of productive resources due to rigid access regulation, the resource rent is dissipated.

For the last five years ICES together with the Faroese Marine Research institute has advised to either close the fishing for cod and haddock or to reduce fishing substantially. As additional advice they have recommended a “Rebuilding plan involving large reductions”, a quote from ICES (2011). Catch of the two most valuable species has in the last five years been less than half compared to the preceding five years.
In an assessment of the resource rent in five specific Nordic fisheries in Nielsen et al. (2006), the actual resource rent in the Faroese case was estimated to be 40% below potential.
Our starting point is thus the question of how can it be that the government does not impose solutions to these pressing problems?

Why does the government not enforce rules to rebuild and maintain the fish-stocks?
Why does it not make the necessary institutional changes to ensure minimal cost per unit catch?

The overarching question for the project is:
Which are the causes of the persistent inefficient redistribution of wealth by inefficient regulation of the fishing industry in the Faroe Islands?

As evident from the facts about the Faroe Islands, the fishing industry is vital for the whole economy and any deviation from policies aimed at efficiency will have detrimental effects on the entire economy, not only by unproductive rent-seeking and suboptimal productivity in the industry itself, but also by the misallocation of productive resources throughout the economy.
This will be an inquiry into the establishment and the persistence of a system of inefficient redistribution of wealth and income through free allotment of valuable fish-quotas to private extractors – a political structure not easily maintained, but still prevailing in the face of an increasingly clear alternative, which is the redistribution of the public appropriation of the resource rent and a subsequent reduction of distortionary taxes.
We will investigate which factors persuade the public (the voters) and the politicians to choose the suboptimal path over the alternative: to auction or tax the resource depletion and earn a double dividend – a more efficient industry and a reduction of distortionary taxes.


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