Measuring fishery productivity growth in the Northeastern United States 2007–2018

Highlights

• Total factor productivity (TFP) is estimated for northeast United States Fisheries.

• TFP estimates are adjusted by biomass growth to yield biomass adjusted TFP.

• Individual Fishery TFP estimates are aggregated to yield a regional TFP total.

• Results showed the importance of biomass growth rates to TFP growth rates.

• Improved biomass growth can lead to higher output growth or lower input growth.

Abstract

Fishing vessel productivity is an important metric in terms of economic performance, and yields information about the financial impact of policy changes on fishing fleets. In this study, a new method is proposed to measure sector-wide commercial fishery total factor productivity (TFP), and is applied using northeastern United States fishery-level data from 2007 to 2018. Results from the study are linked to changes which occurred after 2006 Magnuson–Stevens Fishery Conservation and Management Reauthorization Act (MSFCMRA). This is accomplished by employing a translog production possibility frontier to measure total outputs, inputs, and TFP using Törnqvist indices. Quality differences embodied in the capital assets are accounted for, and the TFP measurement is adjusted for fishery stock changes. Results show that for most fisheries, improvements in biomass after the MSFCMRA re-authorization led to improved TFP. However, when biomass growth estimates were separated from overall TPP growth, biomass-adjusted TFP annual growth declined about 2% per year. This highlights the importance of separating biomass growth from output growth so managers understand the impact of their policies on the commercial fishing sector separately from biomass growth.

Introduction

Productivity is a key driver of profitability, and has been identified as an important indicator for fishery performance. In the fishery productivity literature, most productivity studies focus analysis on individual fisheries using different measurement methods, which include Data Envelope Analysis (DEA), stochastic production frontier (SPF), index number approaches, and econometric transformation functions [15], [19], [23], [29], [31], [32]. However, there is a lack of literature on measuring productivity at an aggregate fishing industry-level. Furthermore, due to data availability or inconsistency issues, there are few cross-fishery comparison studies. For example, Thunberg et al. [32] report annual fishery TFP indicators for 20 catch share programs using the Lowe Index approach. While their output estimates are consistent across fisheries drawing data from the landings, input estimates are inconsistent across fisheries or regions. Some cover capital and labor inputs, and others cover capital, labor, and intermediate goods. Although the TFP time series of a fishery can help understand productivity changes over time for that specific fishery, the estimates of TFP growth cannot be used to compare productivity changes across various fisheries due to input data inconsistency. Consequently, it is challenging to evaluate and compare policy impacts across fisheries unless the data and methods used to estimate productivity growth are consistent.

Under a growth accounting framework [28], TFP growth is the difference between output growth and input growth. Growth that cannot be explained by the productive factors (inputs) will be captured by the unexplained factor—“residual”, which is taken to be total factor productivity growth. This growth accounting framework can be easily applied to an industry, such as commercial fishing[12], but needs to be adjusted to account for the unique nature of fishing. Since fishing vessels harvest resources held in common, changes in biological conditions can affect the harvested output and thus TFP estimates. It is essential to account for the biological fishery stock in productivity measurement in order to separate the effects of biomass changes from technological advancement. It can also help explain how regulations, or harvest restrictions, may affect biomass and TFP estimates more accurately. Another issue with measuring fishery productivity is that each fishery may adopt fishery-specific technology embodied in heterogeneous capital assets, such as different vessels or gear types. Therefore, accounting for quality differences embodied in the capital asset will improve productivity measurement.

In this study, an analytical framework is developed that links various data sources and fisheries in order to measure biomass-adjusted TFP from both the perspective of a single fishery and the aggregate fishery sector in the U.S. Northeast (NE) region. In the rest of this article, a general definition of total factor productivity, noted as TFP^U, is differentiated from a biomass-adjusted definition of TFP, which is referred to as TFP^B. In order to understand the sources of growth for eleven NE fisheries, output growth is decomposed into its sources of growth—input growth (including capital, labor, and intermediate goods), biomass changes, and TFP^B growth. Additionally, the estimates account for quality changes embodied in capital assets in both TFP measures. This study has three major contributions that can help fill gaps in the literature. First, this study that allows the decomposition of a region’s fishery output growth into its sources of growth— growth of inputs, biomass changes, and productivity growth. Secondly, it allows for a wide range (eleven fisheries) of cross-fishery productivity growth comparison based on the same input measurement.¹ Third, this is the first study that provides estimates of fishery productivity growth from the aggregate sector aspect. Results from the study are linked to changes which occurred after implementation of the 2006 Magnuson–Stevens Fishery Conservation and Management Reauthorization Act (MSFCMRA), and how it affected fishery productivity growth between 2007 and 2018. Findings show the influence of biomass growth on productivity change. Although productivity growth that can be attributed to more efficient use of inputs by vessels, or technical change may decline, overall productivity growth can be positive due to biomass growth.

The rest of the paper is organized into four sections. Section II introduces the theoretical framework in measuring output, inputs, and total factor productivity at the fishery level and the aggregate level. In section III, fisheries are defined based on the available data, and the variables and data sources used are described. In section IV, results are presented, and sources of growth for individual fisheries and the aggregate sector are identified. Conclusions and links to policy changes are presented in section V.