Impact of the Icelandic ITQ system on outsiders

Icelanders gradually adopted an Individual Transferable Quota (ITQ) in their waters. 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 the effects of various effort restrictions on the behaviour of fishermen outside of the ITQ system. Empirical estimates from duration model analysis are presented which measure the effects of various management measures aimed at affecting 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 results show that outsiders had incentives to stay outside of the ITQ system and free-ride on the behaviour of the ITQ fleet. Management measures aimed at restricting their effort proved to be ineffective. The conclusions can be generalized to other situations where property rights based management systems are used and economic agents harvest a common resource pool.