Date(s): October 16, 2013, 10:00-11:30am

Location: Room 4128, William Jefferson Clinton West Building, 1301 Constitution Ave., NW, Washington, DC

Contact: Carl Pasurka, 202-566-2275

Presenter(s): Sarah Ball (Dept. of Agricultural and Resource Economics, University of Maryland)

Description: Water quality has been an important policy issue in the US since the mid-1900's, when the Federal Water Pollution Control Act was enacted. Since then, there have been a number of initiatives to improve water quality, many with a goal to increase the social returns from the associated fisheries.

There are concerns that improvements in water quality may not significantly benefit open access fisheries. As the water quality improves, fish stocks will initially increase. As the stock increases, the cost of fishing will decrease, thus, increasing profits. However, as the profits from fishing increase, new fishermen may enter the market and current fishermen may increase their efforts. Both effects ultimately depress fish stocks and profits from harvesting. McConnell and Strand (1989) were among the first to theoretically examine this effect and found that social returns to the fishery are positive under optimal management, but potentially negative under open access.

The goal of this paper is to value water quality using the Maryland commercial blue crab fishery as an economic market. The blue crab fishery was chosen in particular because it is one of the most productive fisheries in the Bay, accounting for over 65% of landings. While the blue crab fishery is technically a limited entry fishery, during the time period of this study, there was a large number of individuals who owned a license but did not harvest crabs. Thus, the limits to entry were not strongly binding on fisherman effort. Because of this, the issues examined in this research should be applicable to open access fisheries.

This analysis is carried out in two stages. First, a set of bio-economic models are developed and then estimated using bottom level dissolved oxygen data, estimated stock data, and aggregated harvest data from 2000-2010. Second, a model of fishermen location choice is developed and then estimated using two data sets, log book data and GPS buoy data, from 2000-2010. Using increasing dissolved oxygen as a proxy for increasing water quality, the models are used to simulate the effects of improvements in dissolved oxygen levels on the blue crab fishery for the years 2010-2030.

The contributions of this paper are to expand upon and unify two bodies of literature: resource valuation and discrete choice modeling. This is done through the use of improved empirical techniques and the construction and use of a richer data set than had previously been available. This data set allows the analysis to include more refined temporal relationships and incorporate heterogeneity across fishermen. Furthermore, the trip-level and water quality data are spatially differentiated, allowing for spatial variations to be included. This paper also improves the theoretical model by incorporating a fisherman's decision to switch to a new location, a decision previously considered to be exogenous, and by eliminating factors used in other studies that tend to confound the effects of meaningful causal variables.

Results indicate that dissolved oxygen affects the availability of crabs to fishermen, as opposed to a commonly held assumption that it affects the mortality. These results also show that both stock and harvest respond inelastically to changes in water quality. Additionally, the decision of whether to switch sites within the fishery is found to be a significant factor in a fisherman's decision making process. Finally, the benefits of increased water quality to the blue crab commercial fishery are found to be relatively small.

Seminar Category: Environmental Economics