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Fishing technology and rent dissipating
Anders Skonhoft
Dep. of Economics NTNU
1.Introduction
• FAO statistics: – 9% of the world fish stocks are depleted– 18% overexploited– 47% fully exploited– 21% moderately exploited
Average for the world. Much more dramatic in traditional fishing grounds (e.g. EU coastal waters)
• Reasons– Institutional structure
• Both within nations• External factors (straddling stocks, migration, etc.)
– Valuable fish stocks• More valuable stock: always higher exploitation
pressure
– Highly efficient fishing technology
• More efficient fishing technology
– Individual beneficiary (at least in the short term)
– Collectively disaster; depressed fish stocks as well as depressed profitability for the industry as a whole ???
– Short-term vs. long-term
– Institutional structure of pivotal importance
• In general: More efficient production, new products: The well-known riving forces behind increased material welfare.
• Pioneering studies: Solow(1956), Abramovitz (1956): 75% of productivity growth due to technological improvement (TFP growth)
• Confirmed by numerous later studies with much better data
• Also sector studies, i.e., agriculture.– Much of the same picture, see, e.g., Hayami and Ruttan 1985
• In what follows:– Technological change/efficiency improvement in a fishery.– Stylized model/reasoning within the institutional structure of
‘unregulated common property type’.In many fisheries (not at least in developing countries, and in large inland fisheries) still the prevailing management scheme
– What happens when fishing technology becomes more efficient? Stock, harvest, rent…
– What type of remedies??• Changing institutional structure?• Input control?
2.Some evidence
• Post-war period rapid progress in fishing technology– Larger boats– Better equipped– New synthetic materials– New finding equipment and techniques– Etc, etc…
• Dramatic reduction in number of fishermen (in Norway and elsewhere)
• Capital stock fluctuating…• Catch fluctuating
• Total factor productivity growth (TFP) Norway:
0.8% per year (1961-2004) (Hannesson 2006)
Correcting for lower fish stocks: Higher
• But large problems with these calculations!!
• But the broad picture clear
3.Technological change and the regulated fishery
• Basic insight from the Gordon-Schaefer model (sole owner equilibrium fishery), or PV-rent maximizing (social planner model) of more efficient harvesting technology:
– More effort use– Smaller stock (but no problems….Xmsy, or..)– Larger rent
• So everything works well!! • More efficient technology is an unmixed bless
Gordon-Schäfer model
Stock
TC
TR
Xmey
4. The unregulated fishery
• Many fisheries still exploited in an unregulated manner (remember: few regulations (at least quota setting) in any fisheries until the beginning of the 1980’s)
• ‘Open-access’ model has served as a benchmark for many years (e.g., Gordon 1954, Homans and Wilen 1997).
• Stylized model: Total rent dissipating. Means: zero-rent for an efficient as well as an inefficient technology. New capacity (vessels) flows in and out.
• Here a more general approach: The fishermen are exploiting a fish stock in a myopic profit maximizing manner.
• Myopic exploitation (…short sighted and neglecting the future…) and no value is imposed on the stock (zero shadow price)
• Widely used exploitation scheme. Baland and Platteau (1996): ‘unregulated common property’. See also e.g., Bromley (1991).
• Not only in fisheries; grazing exploitation (i.e., Saami reindeer herding), wildlife exploitation, etc.
• Important feature: The number of fishermen (or capacity) fixed; local common, no entry), but lack of norms, regulations, etc.
• Model:– Population growth
– Catch function
q ‘catchability coefficent’. Technology parameter (‘TFP’)
– The fishermen aims to maximisze short-run profit
1 ( )t t t tX X F X nh
th qe X
( )t th h X
• h: Contingent upon cost/price ratio, scale properties…and harvesting efficiency (q)
• Non-linear first order difference equation. Possible oscillations and unstability, but harvesting stabilizes (cf. May 1976).
• Possible expansion path:
• Fish stock expansion paths
t
0 10 20 30 40 50
Xt
500
1000
1500
2000
2500
3000
3500
Benchmarkq Lowq High
• Rent (profitability) expansion paths
t
0 10 20 30 40 50
t
800
1000
1200
1400
1600
1800
2000
2200
2400
2600
2800
Benchmarkq Lowq High
• What is going on here?
– More efficient technology means smaller fish stock in the short-term as well as the long-term
– More efficient technology yields highest rent in the short-term, but lowest in the long-term
– The dynamic system will for realistic parameter values (intrinsic growth rate of the fish, etc.) settle down an equilibrium where total harvest=natural growth
• Long-term equilibrium results:
– Stock size, harvest,… and rent depending on harvesting efficiency (q)
• Equilibrium rent and efficiency
Efficiency q
Rent
• Improved technology/efficiency mixed bless!! It may increase as well dissipate the rent.
• Remarkable result. Remember improved
efficiency is assumed to be cost free (‘manna from heaven’).
• The myopic nature of the fishery drives the result, but also externalities. The theory of the second best (Lipsey and Lancaster 1956)
• Rent, efficiency and number of harvesters
n2
n1
n2>n1
Efficiency q
Rent
• Rent, efficiency and value of harvest
p2
p1
p2>p1
Efficiency q
Rent
5. Conclusion
• Simple model with stylized institutional structure
• But holds in many instances. – Fisheries in developing countries – Open seas fisheries– Quasi-regulated fisheries (quota cheating, etc.)
• Myopic exploitation instead of long-term considerations
• Then new technology mixed bless!
• New technology a possible disaster in the long-term.