THE OPPORTUNITY COST OF CAPITAL AND OPTIMAL VESSEL SIZE IN THE NORWEGIAN FISHING FLEET

We test for optimal vessel size in the Norwegian fishing fleet using cross-section data for the period 1969-73. With the prevailing interest rate defined as the opportunity cost of capital, the Conrad-Unger conditions for static optimality in vessel size are rejected for each year. However, using alternative values of the opportunity cost of capital, existing vessel size is shown to be near optimal. We conclude that individual transferable catch quotas could be introduced to regulate the fishery allowing for efficient harvesting but imposing minimal restrictions on vessel size.