Pathways between User Rights and Economic Efficiency in Fisheries and Salmon-Farming of the Faroe Islands

This paper explores the links between the Faroe Islands government's allocation of user rights to fishing and salmon-farming companies and their economic efficiency. Our findings show that the gradual employment of stronger user rights has contributed to better economic outcomes in comparison to results under a weak user rights regime. For salmon farming, strong exclusivity played a pivotal role in improved financial efficiency, although exclusivity has been weakened lately by the introduction of special resource charges. At the same time, the fisheries managed by ITQs similarly witnessed improved economic efficiency, although recent lessening exclusivity and security has weakened the strength of their rights. On the other hand, the coastal demersal fisheries that have been governed by ITEs since 1996 continue to underperform due to fleet overcapacity and despite the presence of strong exclusivity established by the creation of EEZ. Our findings indicate that the government’s proper allocation and design of user rights helps attain sustainable exploration of marine resources under consideration.