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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

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fishing technology and rent dissipating

Fishing technology and rent dissipating

Anders Skonhoft

Dep. of Economics NTNU

1 introduction
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)

slide3
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
slide4
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
slide5
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
slide6
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
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…
slide8
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

3 technological change and the regulated fishery
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
4 the unregulated fishery
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.
slide14
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.
slide15
Model:
    • Population growth
    • Catch function

q ‘catchability coefficent’. Technology parameter (‘TFP’)

    • The fishermen aims to

maximisze short-run profit

slide16
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:
slide19
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
slide20
Long-term equilibrium results:
    • Stock size, harvest,… and rent depending on harvesting efficiency (q)
slide22
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)
5 conclusion
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.
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