Assigning property rights to some but not others. An empirical investigation.

We analyze effects of some imperfections in the Icelandic Fisheries management system. Icelanders gradually adopted an Individual Transferable Quota (ITQ) system in the Icelandic fisheries. This property rights based system yielded benefits to the economy but was not applied to all fishermen. Some fishermen remained outside of the ITQ system and were subject to other management measures. In this paper we investigate whether and how those who stayed outside of the property rights system benefitted from the responsible behaviour of the ITQ fleet. Empirical estimates from duration model analysis are presented which measure the effects of various management measures aimed at effecting the behaviour of those 'outsiders' as well as the indirect effect of the ITQ system on the behaviour of those who stayed outside of it. The focus of the analysis is on the behaviour of economic agents under different institutional settings. The conclusions show that outsiders had incentives to stay outside of the ITQ system and free-rided from the behaviour of the ITQ fleet. Management measures aimed at restricting their effort proved to be useless. The conclusions can be generalized to other situations where property rights based management systems are used and economic agents harvest a common resource pool.