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Input Subsidies and the Destruction of Natural Capital: Chinese Distant Water Fishing

Author

Listed:
  • Gabriel Englander
  • Jihua Zhang
  • Juan Carlos Villaseñor-Derbez
  • Qutu Jiang
  • Mingzhao Hu
  • Olivier Deschenes
  • Christopher Costello

Abstract

Input subsidies in natural resource sectors are widely believed to cause depletion of the natural capital on which those sectors rely. But identification and data challenges have stymied attempts to empirically estimate the causal effect of subsidies on resource extraction. China’s fishing fleet is the world’s largest, and in 2016 the government changed its fuel subsidy policy for distant water vessels to one that increases with predetermined vessel characteristics. The policy features 25 thresholds at which subsidies discontinuously increase. Using a regression discontinuity design, we estimate that a 1% increase in fuel subsidy increases hours of fishing by 2.2%. Reducing Chinese distant water fuel subsidies by 50% could eliminate biological overfishing in several ocean regions.

Suggested Citation

  • Gabriel Englander & Jihua Zhang & Juan Carlos Villaseñor-Derbez & Qutu Jiang & Mingzhao Hu & Olivier Deschenes & Christopher Costello, 2023. "Input Subsidies and the Destruction of Natural Capital: Chinese Distant Water Fishing," NBER Working Papers 31008, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31008
    Note: EEE
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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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