A water pollution haven hypothesis in a dynamic agglomeration model for fisheries resource management

Abstract

Individual transferable quota (ITQ) systems are introduced in the context of global competition for fishery resources. However, rent-seeking for ITQ occurs as a potential rent, and the resource protection function is undermined. Additionally, globalisation may create a water pollution haven hypothesis through the location behaviour of fish processing firms, which drain polluted water during their production processes. This study aims to demonstrate this hypothesis using an R&D-based growth model with rent-seeking for ITQ and firm location for two countries, North and South. The South seeks to increase fish exports by increasing catch quotas. This policy increases the production of fish products and leads to a decreased economic growth rate via labour mobility from innovation to the fisheries sector. If the North reacts to the South’s policy by lowering its catch quotas, the policy prompts fish-processing firms to drain polluted water and relocate from the North to the South. Loose fishing quotas in the South compared to the North lead to worsening fishery resources through increased polluted water. This supports the water pollution haven hypothesis. Then, expanding the rent-seeking pressure on ITQs leads to faster economic growth, while increasing polluted water reduces fishery resources. This study implies that cooperative and complementary policy responses to reduce quotas in the North and South are important for achieving sustainable fisheries.