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Excess capacity and the race to fish : the role of capital malleability, environmental variation and quota management

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Rust, SA (2016) Excess capacity and the race to fish : the role of capital malleability, environmental variation and quota management. PhD thesis, University of Tasmania.

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Abstract

Excess capacity is a major issue in world fisheries. In addition to reducing the ability of
managers to control the global harvest and increasing the potential for effort spill-over
between fisheries, excess capacity introduces a prospective level of economic waste in the
fishery. When there is excess capacity in a fishery, more inputs are being used than is
necessary to produce the current output and economic theory suggests that the net benefit to
society from the resource exploitation is not maximised. Fishery managers worldwide are
concerned with reducing the levels of excess capacity in their fisheries. In fisheries where
‘race to fish’ behaviour is prominent, competitive harvesting can also encourage inefficient
investments in capital which create the potential for problematic excess capacity. Such
behaviour is termed the ‘race to invest’ in this thesis.
The objective of the thesis is to investigate how race to fish and race to invest behaviours
affect the level of excess capacity. The thesis consists of three essays, in which excess
capacity is examined in the open access fishery, where the race to fish and race to invest are
pervasive, and also during a period of race behaviour in a catch-controlled fishery. The first
essay investigates the relationship between the malleability of capital and the level of excess
capacity using a dynamic model of the open access fishery. The malleability of capital in this
essay is represented by a difference between the purchase and resale prices of capital. The
second essay investigates the connection between environmental variation and excess
capacity, also in the open access fishery. This essay characterises the emergence of excess
capacity under transient fluctuations in recruitment, and also uses parameterised simulations
to investigate excess capacity when there is a regular cyclical fluctuation in recruitment and
for ‘positive’ and ‘negative’ regime shifts, where the recruitment of the fishery permanently increases or decreases. In these essays, the race to fish and the race to invest are modelled
separately, so the conventional race to fish determines the level of fishing effort (i.e. capacity
utilisation) and the level of capital investment is driven by a race to invest, in which fishers’
expectations are formed myopically (according to the theory of projection bias). The third
essay undertakes an empirical analysis of excess capacity and efficiency in the Tasmanian
rock lobster fishery using the Data Envelopment Analysis methodology. This essay
investigates whether the adjustment of the fishery, after the introduction of the Individual
Transferable Quota (ITQ) system in 1998, has occurred over a prolonged period of time. This
would suggest that the ITQ system may have a larger impact on excess capacity in that
fishery than is indicated by comparable studies in other fisheries. In addition, this essay looks
for evidence of the re-emergence of excess capacity in the fishery during a period of
non-binding Total Allowable Catch (TAC) between the 2008 and the 2010 quota years.
The results in this thesis highlight a potential trade-off between excess capacity and the
biological outcome for the fishery, which suggests caution in using the level of excess
capacity as an indication of the fishery’s health. The results also show that the reduction or
elimination of excess capacity can be achieved through increasing the malleability of capital
or by the cessation of competitive investment during transient positive fluctuations in
recruitment. Finally, the thesis finds little evidence for a temporal change in either excess
capacity or efficiency following the introduction of an ITQ system in the Tasmanian rock
lobster fishery, and confirms that a period of non-binding TAC in that fishery was not
associated with an increase in excess capacity.

Item Type: Thesis (PhD)
Keywords: Capital malleability, environmental variation, excess capacity, race to fish, race to invest, myopia, individual transferable quota, capacity utilisation
Copyright Information:

Copyright 2015 the Author

Additional Information:

Chapter 2 has been published as: Rust, S., Jennings, S., Yamazaki, S. (2016) Excess capacity and capital malleability in a fishery with myopic expectations, Marine resource economics, 31(1), 63-81.

Date Deposited: 31 Oct 2016 01:05
Last Modified: 06 Mar 2017 01:56
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