An Analysis of Sector Allocations in Commercial Fisheries

Abstract

The formation of harvest cooperatives has recently generated considerable interest among fishermen and regulators as an alternative to other rights-based systems such as individual transferable quotas. Many consider the promotion of self-governance to be essential to more sustainable, equitable and efficient management of commercial fisheries. This dissertation examines the incentives created by the allocation of collective fishing rights as a mechanism for inducing the creation of cooperatives (or sectors). A theoretical model of the fishery characterizes necessary and sufficient conditions for the formation of sectors when harvesters have incomplete information on how to organize collective fishing but instead must learn by doing. The equilibria of the dynamic sector-formation game played by the heterogeneous fishermen shows that sectors may fail to form if permit holders are unfamiliar with cooperative harvesting. Conversely, when sectors do organize, the least skilled fishermen join first and the scope of their cooperation, as given by the number of tasks they choose to coordinate, increases progressively over time until the uncertainty is fully resolved. Profitability, in turn, benefits from enhanced cooperation.

I test the predictions of the model using a panel data set from the hook gear segment in the New England Multispecies Fishery to estimate a stochastic output distance function and a technical inefficiency model. The simultaneous estimation of both equations allows the full characterization of the underlying multi-output technology and the assessment of key determinants of technical efficiency such as vessel characteristics, congestion conditions and cooperation. The results show that the least efficient vessels were the first to join the Georges Bank Cod Hook sector in 2004, and present evidence of earlier cooperation among these vessels (i.e. previous to the institutionalization of the group as a sector), hence suggesting familiarity with collective harvesting when joining the sector. Additionally, the resulst demonstrate that technical efficiency was higher for sector vessels than common pool boats during the sector years and increased during this period.