Investment Behaviour and Capacity Adjustment in Fisheries: A Survey of the Literature

Abstract

This article provides a survey of the economic literature on investment behaviour and capacity adJustment in fisheries. An overview of the existing theoretical and the empirical work is provided, and areas that require more work are pointed out. The survey shows that while a large body of theoretical work has been developed on the issue of capital adjustment in fisheries, relatively less attention has been granted to the theory of investment, where this becomes a separate decision to the decision about capital levels; i.e., where capital is quasi-malleable. In addition, empirical studies have been fairly limited, and more work is still needed to analyse and fUrther investigate these issues in practical situations. There is particularly a need for more empirical studies of investment behaviour and drivers of investment behaviour at the firm level based on adequate economic data.

Excess Capacity and Capital Malleability in a Fishery with Myopic Expectations

“…While this assumption is consistent with the spirit of open-access resource use, incorporating alternative ways in which fishers form expectations (Holland 2008) into harvesting and investment behavior would be useful. In addition, and as called for by Nøstbakken, Thebaud, and Sørensen (2011), exploring the effect of alternative investment rules or heuristics on capacity development, reflecting alternative types of fishery business organizations, would be useful. Finally, our model of capital accumulation in the fishery is deterministic and, as such, does not account for the high levels of natural variability that are characteristic of many fish populations (Caddy and Gulland 1983;Hofmann and Powell 1998).…”

Micro-economic drivers of profitability in an ITQ-managed fishery: An analysis of the Queensland Coral Reef Fin-Fish Fishery

“…whether they own or lease the licences and quota they require to operate, and whether they derive income from these other than through directly fishing), businesses will not be facing the same risks and will not be impacted in the same ways by externally driven changes in their environment. Hence, the same overall changes affecting the fishery may generate different responses from different businesses, which may explain the differences in views expressed on future management of the fishery, particularly as regards the adequate level of TAC for CT. As stressed by [24], this is still a poorly understood dimension of investment in fisheries, when it is becoming a dominant feature in the quota managed fisheries like the CRFFF, where a combination of access entitlements is required to commercially harvest fish. Finally, it also became apparent in the course of carrying out this analysis that a key dimension of fishing businesses is whether the vessels are operated by their owner, or whether they are operated by a hired skipper.…”

Fisheries Management Under Irreversible Investment: Does Stochasticity Matter?

“…The stochastic process is central in explaining the uncertainty in growth and development of natural resources. However, in the bioeconomic literature, stochastic models are much fewer than deterministic models (Agnarsson et al, 2008;Nøstbakken et al, 2011), particularly in stock-capital interaction models due to the complexity of the stochastic elements in the model (Nøstbakken, et al, 2011). Charles (1983) and Charles and Munro (1985) were among the first few authors to study the effect of stochasticity in natural resources management with irreversible investment.…”

“…Researchers have been unable to incorporate both stochasticity in stock and capital dynamics in the analysis of the fisheries management due to the computational difficulties (Nøstbakken, et al, 2011;Singh et al, 2006). A study by Singh et al (2006) that included uncertainty in the stock dynamics and linear cost of capital adjustment suggest lower optimal exploitation level.…”

“…Moreover consideration of stochastic depreciation allows depreciation shocks to serve as an additional driving force behind macroeconomic fluctuations along with technology shocks (Dueker, et al, 2007). Furthermore, the uncertainty may potentially have a great impact on the investment decisions of the fishing firms and the capacity development of their capital resources (Nøstbakken, et al, 2011). Therefore, we find it appropriate to include stochasticity in the capital management in our model.…”