Structure and evolution of cod quota market networks in Iceland over times of financial volatility

Maartje Oostdijk; Maria J. Santos; Sveinn Agnarsson; Pamela J. Woods

doi:10.1016/j.ecolecon.2019.01.035

Structure and evolution of cod quota market networks in Iceland over times of financial volatility

Maartje Oostdijk^*, Maria J. Santos, Sveinn Agnarsson, Pamela J. Woods

^*Corresponding author for this work

Faculty of Business Administration

Research output: Contribution to journal › Article › peer-review

3 Citations (Scopus)

Abstract

The quota market is the instrument through which fishing operations under an individual transferable quota (ITQ) system achieve greater efficiency. It allows fishing companies to optimally configure their quota portfolios to their catches. Globally, fisheries corresponding to ~25% of landings have adopted ITQ systems. However, there is surprisingly little empirical information on quota markets functioning. Here we study the development of quota share and lease markets and assess market activity and functioning for the cod fishery in Iceland. We use a social network analysis to assess changes in four Icelandic quota markets, distinguished by boat size (large versus small) and permanence of transfers (leases versus shares). The quota market for permanent trades in small-boat quota shows a sharp increase in trade and network connectivity between 2004 and 2006, resulting in a high rate of quota concentration. The quota markets for permanent quota shares were the most fragmented and sparse during the years of the financial crash in Iceland and never regain the same activity. Our results suggest that quota systems evolve towards a consolidated state and that their markets are not entirely resilient to financial instability. We also found some evidence that better-connected traders could sell quota at higher prices in the lease markets, though price dispersion was generally low.

Original language	English
Pages (from-to)	279-290
Number of pages	12
Journal	Ecological Economics
Volume	159
DOIs	https://doi.org/10.1016/j.ecolecon.2019.01.035
Publication status	Published - May 2019

Bibliographical note

Funding Information:
We thank Hrafn Þorvaldsson who scripted the quota trade data for us from Fiskistofa.is and built the data base with quota trades. Maartje Oostdijk has received funding from the European Union's Horizon 2020 research and innovation programme under the Marie Skłodowska-Curie grant agreement no. 675153. We'd also like to thank Conor J. Bryne for insights into the workings for the Icelandic quota system, as well as two anonymous reviewers who offered constructive comments on an earlier version of this manuscript.

Funding Information:
We thank Hrafn Þorvaldsson who scripted the quota trade data for us from Fiskistofa.is and built the data base with quota trades. Maartje Oostdijk has received funding from the European Union's Horizon 2020 research and innovation programme under the Marie Skłodowska-Curie grant agreement no. 675153 . We'd also like to thank Conor J. Bryne for insights into the workings for the Icelandic quota system, as well as two anonymous reviewers who offered constructive comments on an earlier version of this manuscript.

Publisher Copyright:
© 2019

Other keywords

Cod fishery
Exponential random graph
Iceland
Market-based-instruments
Quota markets
Social network analysis

Access to Document

10.1016/j.ecolecon.2019.01.035

AdaptEconII: Adaptation to a New Economic Reality
Ragnarsdóttir, K. V. (PI)
1/12/15 → 30/11/19
Project: Research

Cite this

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title = "Structure and evolution of cod quota market networks in Iceland over times of financial volatility",

abstract = "The quota market is the instrument through which fishing operations under an individual transferable quota (ITQ) system achieve greater efficiency. It allows fishing companies to optimally configure their quota portfolios to their catches. Globally, fisheries corresponding to ~25% of landings have adopted ITQ systems. However, there is surprisingly little empirical information on quota markets functioning. Here we study the development of quota share and lease markets and assess market activity and functioning for the cod fishery in Iceland. We use a social network analysis to assess changes in four Icelandic quota markets, distinguished by boat size (large versus small) and permanence of transfers (leases versus shares). The quota market for permanent trades in small-boat quota shows a sharp increase in trade and network connectivity between 2004 and 2006, resulting in a high rate of quota concentration. The quota markets for permanent quota shares were the most fragmented and sparse during the years of the financial crash in Iceland and never regain the same activity. Our results suggest that quota systems evolve towards a consolidated state and that their markets are not entirely resilient to financial instability. We also found some evidence that better-connected traders could sell quota at higher prices in the lease markets, though price dispersion was generally low.",

keywords = "Cod fishery, Exponential random graph, Iceland, Market-based-instruments, Quota markets, Social network analysis",

author = "Maartje Oostdijk and Santos, {Maria J.} and Sveinn Agnarsson and Woods, {Pamela J.}",

note = "Funding Information: We thank Hrafn {\TH}orvaldsson who scripted the quota trade data for us from Fiskistofa.is and built the data base with quota trades. Maartje Oostdijk has received funding from the European Union's Horizon 2020 research and innovation programme under the Marie Sk{\l}odowska-Curie grant agreement no. 675153. We'd also like to thank Conor J. Bryne for insights into the workings for the Icelandic quota system, as well as two anonymous reviewers who offered constructive comments on an earlier version of this manuscript. Funding Information: We thank Hrafn {\TH}orvaldsson who scripted the quota trade data for us from Fiskistofa.is and built the data base with quota trades. Maartje Oostdijk has received funding from the European Union's Horizon 2020 research and innovation programme under the Marie Sk{\l}odowska-Curie grant agreement no. 675153 . We'd also like to thank Conor J. Bryne for insights into the workings for the Icelandic quota system, as well as two anonymous reviewers who offered constructive comments on an earlier version of this manuscript. Publisher Copyright: {\textcopyright} 2019",

year = "2019",

month = may,

doi = "10.1016/j.ecolecon.2019.01.035",

language = "English",

volume = "159",

pages = "279--290",

journal = "Ecological Economics",

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AU - Oostdijk, Maartje

AU - Santos, Maria J.

AU - Agnarsson, Sveinn

AU - Woods, Pamela J.

N1 - Funding Information: We thank Hrafn Þorvaldsson who scripted the quota trade data for us from Fiskistofa.is and built the data base with quota trades. Maartje Oostdijk has received funding from the European Union's Horizon 2020 research and innovation programme under the Marie Skłodowska-Curie grant agreement no. 675153. We'd also like to thank Conor J. Bryne for insights into the workings for the Icelandic quota system, as well as two anonymous reviewers who offered constructive comments on an earlier version of this manuscript. Funding Information: We thank Hrafn Þorvaldsson who scripted the quota trade data for us from Fiskistofa.is and built the data base with quota trades. Maartje Oostdijk has received funding from the European Union's Horizon 2020 research and innovation programme under the Marie Skłodowska-Curie grant agreement no. 675153 . We'd also like to thank Conor J. Bryne for insights into the workings for the Icelandic quota system, as well as two anonymous reviewers who offered constructive comments on an earlier version of this manuscript. Publisher Copyright: © 2019

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N2 - The quota market is the instrument through which fishing operations under an individual transferable quota (ITQ) system achieve greater efficiency. It allows fishing companies to optimally configure their quota portfolios to their catches. Globally, fisheries corresponding to ~25% of landings have adopted ITQ systems. However, there is surprisingly little empirical information on quota markets functioning. Here we study the development of quota share and lease markets and assess market activity and functioning for the cod fishery in Iceland. We use a social network analysis to assess changes in four Icelandic quota markets, distinguished by boat size (large versus small) and permanence of transfers (leases versus shares). The quota market for permanent trades in small-boat quota shows a sharp increase in trade and network connectivity between 2004 and 2006, resulting in a high rate of quota concentration. The quota markets for permanent quota shares were the most fragmented and sparse during the years of the financial crash in Iceland and never regain the same activity. Our results suggest that quota systems evolve towards a consolidated state and that their markets are not entirely resilient to financial instability. We also found some evidence that better-connected traders could sell quota at higher prices in the lease markets, though price dispersion was generally low.

AB - The quota market is the instrument through which fishing operations under an individual transferable quota (ITQ) system achieve greater efficiency. It allows fishing companies to optimally configure their quota portfolios to their catches. Globally, fisheries corresponding to ~25% of landings have adopted ITQ systems. However, there is surprisingly little empirical information on quota markets functioning. Here we study the development of quota share and lease markets and assess market activity and functioning for the cod fishery in Iceland. We use a social network analysis to assess changes in four Icelandic quota markets, distinguished by boat size (large versus small) and permanence of transfers (leases versus shares). The quota market for permanent trades in small-boat quota shows a sharp increase in trade and network connectivity between 2004 and 2006, resulting in a high rate of quota concentration. The quota markets for permanent quota shares were the most fragmented and sparse during the years of the financial crash in Iceland and never regain the same activity. Our results suggest that quota systems evolve towards a consolidated state and that their markets are not entirely resilient to financial instability. We also found some evidence that better-connected traders could sell quota at higher prices in the lease markets, though price dispersion was generally low.

KW - Cod fishery

KW - Exponential random graph

KW - Iceland

KW - Market-based-instruments

KW - Quota markets

KW - Social network analysis

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DO - 10.1016/j.ecolecon.2019.01.035

M3 - Article

AN - SCOPUS:85061135603

SN - 0921-8009

VL - 159

SP - 279

EP - 290

JO - Ecological Economics

JF - Ecological Economics

ER -

Structure and evolution of cod quota market networks in Iceland over times of financial volatility

Abstract

Bibliographical note

Other keywords

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Projects

AdaptEconII: Adaptation to a New Economic Reality

Cite this