Iceland's ITQ System Creates New Wealth

Abstract

"Iceland, a moderately large fishing nation, was one of the first to adopt the ITQ system in its fisheries. Therefore, considerable experience of the system's impact along the dimensions discussed above has been accumulated. Clearly, reviewing Iceland's experience is of considerable interest, and is the purpose of this paper. In particular, the paper seeks to assess the extent of wealth creation within the ITQ system, and how that wealth may have propagated throughout the Icelandic economy.

"It turns out that the new wealth created by the ITQ system in the fisheries themselves (the first stage) is quite substantial relative to the national capital and the GDP of Iceland. Therefore, the economic growth effects (the second stage of wealth creation) might be expected to be correspondingly large. Indeed, the introduction of the ITQ system (in a fairly complete form) was followed by a substantial spurt in economic growth, the longest such period in Iceland's modern history. Although this economic growth primarily occurred in sectors of the economy other than the fisheries sector, most importantly the financial services sector, there is evidence that it was significantly assisted by the wealth initially generated by the ITQ system."