Economic and conservation implications of a variable effort penalty system in effort-controlled fisheries

Bycatch of threatened, endangered or protected species by commercial fishers is a universal problem. Technical solutions are often applied that may impose inefficiencies across the fleet, even in periods or areas when the risk of bycatch is low. These may include gear specifically designed to avoid the bycatch which may also reduce the targeted catch, or designation of marine protected areas that exclude fishing from whole areas. In this article, we examine the effectiveness of a variable penalty system that can provide incentives for fishers to redirect their effort away from problem areas. The system is examined using a case study of fishery, which is currently subjected to gear and closure controls to limit bycatch of turtles and seabirds. An alternative incentive-based management policy using a series of differential hook penalties has been proposed as a flexible tool to discourage vessels operating in certain areas. The effects of various hook penalties and closures in key areas on fishing effort in those areas and elsewhere as well as vessel economic performance are assessed using a location choice model. The results suggest that incentive-based approaches may result in lower costs to industry than closures provided some level of residual bycatch is acceptable.     

Voluntary Provision of Public Goods and Technology

This paper highlights issues in the theory of voluntary provision of public goods, building on the investigation by Peacock in connection with the contributions by Coase and Buchanan. Our goal is twofold. We first draw attention to the early literature investigating the provision of public goods and to the successive theoretical analysis. We then focus on the impact of technology on supply and demand. Examples of different types of public goods are provided, with special attention to the cultural sector, to investigate whether and how technology affects the efficiency and the effectiveness of the related public goods provision. The implementation and exploitation of technological advancements are investigated in view of the role of different actors (public, private) at different levels of government.     

Lineage-based heterogeneity and cooperative behavior in rural China

This paper investigates how lineages, the commonly found organizations in rural villages of China, affect people's intra- and cross-lineage cooperative behavior. We use data from the Chinese Household Income Project Survey 2002, which exclusively contains information about the lineage structure in these villages allowing us to classify three levels of lineage-based heterogeneity. Our identification strategy relies on the exogeneity of lineage-based heterogeneity. We find evidence that people in a village with higher lineage-based heterogeneity are less likely to exhibit reciprocity behavior within lineages or contribute to the provision of public goods that are jointly shared across lineages. The estimation results remain robust to the inclusion of various control variables and additional background characteristics. Finally, we examine a number of other economic outcomes and find that more homogenous villages do better than other types of villages.     

Heterogeneity, returns to scale, and collective action

Abstract .  I analyze the effects of resource inequality and valuation heterogeneity on the provision of public goods with increasing or decreasing returns to scale in production. The existing literature typically takes the agents' characteristics as given and known to the researcher. In contrast, this paper compares collective action provision across groups of agents with resources and valuations for the public good drawn from different known joint distributions. Specifically, I characterize the expected equilibrium public good level as function of various distributional properties and moments. A resource-valuation distribution that first-order stochastically dominates another distribution always results in higher expected public good provision level, independent of the production technology. With decreasing returns to scale in the public good production, higher resource inequality results in higher expected provision. With increasing returns the same result holds when the mean resource level is relatively low, but expected provision decreases in inequality when the mean resource level is high. A parallel result holds for agents' valuations.     

Can political entrepreneurs solve the free-rider problem?

A solution of the problem of voluntary collective action, employing an improved concept of political entrepreneurship is proposed. This solution is consistent with large numbers of actors and pure public goods (joint production of private goods and asymmetry are not assumed). The importance of information imperfections in producing suboptimality in the provision of public goods is emphasized. Political entrepreneurship is made to parallel the Knightian concept of the entrepreneur, emphasizing the role of risk-taking and information collecting.     

Matching behavior and collective action: Some experimental evidence

A new approach to explaining voluntary collective action, emphasizing strategic interactions of actors in their contributions to the provision of a public good, is tested experimentally. The results support this approach, and tend to reject the conventional, Cournot theory of the provision of public goods. Among the findings are a positive interaction between individual contributions to the provision of a public good, and a U-shaped time trend in combined contributions.     

The Taxation of Financial Capital under Asymmetric Information and the Tax‐competition Paradox

Information sharing between governments is examined in an optimal‐taxation framework. We introduce a taxonomy of alternative systems of international capital‐income taxation and characterize the choice of tax rates and information exchange. The model reproduces the conclusion found in earlier literature that integration of international caopital markets may lead to the under‐provision of publicly provided goods. However, in contrast to previous results in the literature, under‐provision occurs due to inefficiently coordinated expectations. We show that there exists a second equilibrium with an efficient level of public‐good provision as well as complete and voluntary information exchange between national tax authorities.     

Nash as an Organizing Principle in the Voluntary Provision of Public Goods: Experimental Evidence

Experiments are reported that add to the growing literature on the voluntary provision of public goods. Information conditions are manipulated to address whether early findings of above-equilibrium contributions to a public good are a result of complete information regarding the symmetry of the game. No significant information effect was found. Further, by examining designs with an interior Nash equilibrium, this research suggests that the nonzero contributions observed in the previous dominant strategy environments, where the prediction was a zero level of provision of the public good, were not simply transitional errors as the system converged to a boundary equilibrium.     

Plausible cooperation

There is a large repeated games literature illustrating how future interactions provide incentives for cooperation. Much of the earlier literature assumes public monitoring. Departures from public monitoring to private monitoring that incorporate differences in players' observations may dramatically complicate coordination and the provision of incentives, with the consequence that equilibria with private monitoring often seem unrealistically complex or fragile. We set out a model in which players accomplish cooperation in an intuitively plausible fashion. Players process information via a mental system – a set of psychological states and a transition function between states depending on observations. Players restrict attention to a relatively small set of simple strategies, and consequently, might learn which perform well.     

Information Sharing and Cooperative Search in Fisheries

We present a dynamic game of search and learning about the productivity of competing fishing locations. Perfect Bayesian Nash equilibrium search patterns for non-cooperating fishermen and members of an information sharing cooperative are compared with first-best outcomes. Independent fishermen do not internalize the full value of information, and do not replicate first-best search. A fishing cooperative faces a free-riding problem, as each coop member prefers that other members undertake costly search for information. Pooling contracts among coop members may mitigate, but are not likely to eliminate free-riding. Our results explain the paucity of information sharing in fisheries and suggest regulators use caution in advocating cooperatives as a solution to common pool inefficiencies in fisheries.     

Dissertation abstract: The experimental analysis of the political economics of fisheries governance

This dissertation focuses on the political economy of fisheries governance. The study develops a formal model of fisheries governance by combining the features of the common pool fishery and the political institution of lobbying; designs a laboratory fishery governance institution and conducts economic experiments to test the hypotheses derived from the formal model. Specifically, the study analyzes how fishing firms invest in efforts to influence fishery regulation and management through voluntary contribution lobbying. The study also analyses and compares contribution and effort behavior in the lobbying and the CPR using data from economic experiments. The results indicate that lobbying to change suboptimal fishery regulations was significantly below the subgame perfect equilibrium prediction and contributions to raise the cap were significantly different than contributions to lower the cap toward the social optimum. Study results show that subjects successfully lobbied to raise inefficiently low fishing quotas, but were unable to lobby to reduce inefficiently high fishing quotas. Detailed analysis of subjects’ contribution and effort behavior suggest that despite the interesting benefit-cost duality between pure public goods and CPRs, the pattern of cooperative behavior in these two social dilemma situations was different and the level of cooperation in the voluntary contribution lobbying experiment was lower than those reported in other public goods experiments. To provide external validity to these experimental findings, the study further analyzes and compares lobbying expenditures in the fishery sector with those in other natural resource industries using field data from the United States. A comparison of actual lobbying expenditures as percentage of valued added shows that lobbying effort in the U.S fishery sector is not significantly different than those in other natural resource industries such as mining and electric utility industries, but the pattern of lobbying is different. Whereas fishing firms lobby through associations or pressure groups, firms in other natural resource industries lobby unilaterally. This observation suggests that differences in industrial structure and incentives influence the pattern of lobbying and the lobbying behavior of firms across industries. The theoretical predictions derived from the formal model of fisheries governance are consistent with our experimental findings and with the field data on lobbying in the US fisheries sector. These findings suggest that heterogeneity drives rent-seeking activities in the US fisheries sector and that fishing firms attempt to circumvent political collective action problems by forming and lobbying through associations of stakeholders with relatively homogenous policy preferences. JEL Classification D22, D72, D78, H41 Advisor: Prof. Jon G. Sutinen     

Favor trading in public good provision

Favor trading is common. We do something nice for someone and they do something nice in return. Several motives might underlie such behavior, including altruism, strategic motives, and direct or indirect positive reciprocity. It is not yet well-understood how these fit together to affect behavior, how they interact in various institutional structures, and how they play out over time. We use a laboratory experiment to study the elements and dynamics of favor trading in a particular setting: the private provision of a public good. In our experiment, giving subjects the ability to practice targeted reciprocity by making a simple, low-cost change in information provision increases contributions to the public good by 14 %. Subjects reward group members who have previously been generous to them and withhold rewards from ungenerous group members. Strategic concerns cannot explain all of this behavior, and it must be at least partly due to direct reciprocity. When someone cannot directly benefit from favor trading, he gives much less to the public good. People thus excluded from the “circle of reciprocity” provide a clean and strict test of indirect reciprocity. Contrary to previous studies in the literature, we do not observe indirect reciprocity.     

Non‐Governmental Public Norm Enforcement in Large Societies as a Two‐Stage Game of Voluntary Public Good Provision

In small groups, norm enforcement is achieved through mutual punishment and reward. In large societies, norms are enforced by specialists such as government officials. However, not every public cause is overseen by states, for instance those organized at the international level. This paper shows how nongovernmental norm enforcement can emerge as a decentralized equilibrium. As a first stage, individuals voluntarily contribute to a nongovernmental agency that produces an incentive system. The second stage is the provision of a public good on the basis of private contributions. The incentive system increases contributions by means of public approval or disapproval of behavior. It is shown that, even in large populations, nongovernmental norm enforcement can be supported in a noncooperative equilibrium of utility‐maximizing individuals. This result is in sharp contrast to those obtained in the standard situation of voluntary provision of an intrinsic public good which—without altruism or related motives—is eroded by free‐riding. Reliance on altruistic behavior is not required in supplying the second‐order public good “norm enforcement” in large societies.     

Optimal Redistribution with Productive Social Services

Publicly‐provided private goods are conventionally considered consumer goods. Departing from this perspective, we analyze the public provision of inputs that improve household productivity (e.g., education and childcare). In a two‐class economy with distorting taxation, public provision is always welfare improving with respect to pure taxation, given that the public input directly affects household productivity. Moreover, the case for public provision strengthens as households' heterogeneity in input demand fades out, contrary to consolidated results in the literature. The features of optimal provision schemes depend on the nature of publicly provided input, namely, if it substitutes household productive capacity or just helps households to exploit it.     

A Note on Public Input Specifications

Public or fiscal policy is sometimes concerned with the provision of some infrastructure. This paper deals with the specification of such infrastructures as public inputs. Among other things, and in contrast to relevant literature, it is shown that there is no identity between various public inputs concepts. Thus, the results help to avoid misspecifications and may contribute to better public policy designs concerning the provision of infrastructures.     

Clubs,local public goods and transportation models: A synthesis

Clubs, local public goods, and transportation models are analyzed within a unified model. The emphasis is on the derivation of optimal allocation, pricing and the size of the sharing group. We derive the conditions under which optimal prices will yield surplus or deficit, as well as those under which competitive provision will be efficient. Given heterogeneous tastes we prove that segregation according to tastes is generally efficient although several cases where this result does not hold are also discussed. We show that the existing literature is unnecessarily restrictive and that the unified approach suggested here considerably extends the existing analysis of clubs' local public goods and the transportation problems.     

MODELS OF PUBLIC–PRIVATE PARTNERSHIPS FOR THE PROVISION OF GOODS

Beside the traditional public–private dichotomy for the provision of public services, an increasing attention has been devoted to the use of public–private partnerships (PPPs). This paper compares relative inefficiencies of public provision, traditional private provision and PPPs as found in real cases, in the literature and through original theoretical models.     

Labour supply, foreign investment and welfare in the presence of public infrastructure

Within the context of a small open economy where both foreign investment and the provision of public infrastructure are endogenous, this paper examines the impact of an exogenous increase in labour supply. An increase in labour supply can be attributed to labour inflow. A number of empirical studies have demonstrated the importance of public infrastructure in real economies and both developed and developing countries have attracted significant foreign investment in recent years. This paper shows that, in the case of a diversified equilibrium, variations in labour supply do not affect the wage rate, provision of public infrastructure or welfare. However, an increase in labour supply decreases foreign investment as long as the producers of the private goods derive equal benefits from public infrastructure. In the case of complete specialisation, an increase in labour supply increases the provision of public infrastructure, which leads to an increase in the wage rate and foreign investment. An increase in labour supply increases welfare as long as the provision of public infrastructure involves some fixed cost.     

Bergstrom,Blume, and Varian: Voluntary contributions and neutrality

Bergstrom, Blume, and Varian provided a neutrality result for the private provision of public goods that has inspired a considerable literature. The result has significant implications for income redistribution and broader policy interventions. This paper reviews the basic result and its applications, and discusses extensions to general private provision economies.     

Consumer welfare from publicly supplemented private goods: age and income effects on demand for health care

In spite of major advances in the theoretical, positive and normative, literature analysing the welfare implications of public provision of private goods, empirical investigation is often limited to contingent valuation studies, for example, of health care programmes. In this article we argue that when a market for a (subsidised or free of charge) publicly provided good exists, a consumer demand approach can be used to construct a money metric of welfare corresponding to the consumption of public provision. We illustrate this approach in investigating age and income effects on household demand for health care in Cyprus, where free public provision is not universal and those entitled to it often resort to private supplementation. Our findings suggest that the money metric of welfare, which consumers attach to free access to publicly provided health care, varies with age and to a lesser extent with household income.