Profit and rent in the Icelandic harvesting sector

The large gap between observed profitability and estimated potential efficiency of the ITQ-based Icelandic harvesting sector begs the question - how much is due to rent dissipation and how much to transfers? This paper examines the contribution of rent transfers from vessel owners to other stakeholders, focusing on processors, fishermen and the government, and finds evidence of substantial transfers, particularly to the first two groups. The mechanisms underlying these transfers are shown to involve internal transfer prices of fish within integrated harvester-processors and fishermen crew shares, both of which are centrally negotiated by vessel owner and fishermen organisations. A speculative model is proposed whereby the security of grandfathered quota property rights is undermined by public pressure to tax visible resource rent. Vessel owners alleviate this pressure by shifting profits downstream to vertically integrated processing facilities, in cooperation with fishermen unions.