ITQs, Firm Dynamics and Wealth Distribution: Does full tradability increase inequality?

Da Rocha Alvarez, Jose Maria and Sempere, Jaume (2015): ITQs, Firm Dynamics and Wealth Distribution: Does full tradability increase inequality?

Abstract

Concerns over the distributive effects of ITQ’s lead to restrictions on their tradability. We consider a general equilibrium model with firm dynamics. In contrast with the standard framework, the distribution of firms is not exogenous, but is instead determined endogenously by entry/exit decisions made by firms. We show that the stationary wealth distribution depends on whether the ITQs are fully tradable or not. We calibrate our model to match the observed increase in revenue inequality in the Northeast Multispecies (ground-fish) U.S. Fishery. We show that although observed revenue inequality increases, wealth inequality is reduced by 40%.

• Item Type: MPRA Paper
• Language: English
• Keywords: ITQ, wealth distribution, firm dynamics, inequality, permit markets
• Subjects: D - Microeconomics > D6 - Welfare Economics; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy

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