Fishing fleet capacity and profitability

The individual transferable quotas (ITQ) system is a popular fisheries management system applied in many countries. Here, vessels are scrapped or sold out of the fishery, and their quotas are transferred to the remaining vessels, resulting in lower number of active vessels. This consequently reduces the overcapacity of fishing fleets and likely improves financial performance. Unlike previous studies, this paper quantifies the impact of capacity adjustment on vessel profitability through an econometric model. Supply and demand shifters are included in the model to isolate the influence of capacity adjustment. The case studies are the total Norwegian fishing fleet and an important vessel group - the ocean-going cod trawlers. Empirical findings generally indicate a positive impact of capacity adjustment on vessel financial performance. The observed recent decline in financial profitability of the fishing fleet may therefore be attributed to other factors rather than overcapacity.