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Optimally Managing a Stochastic Renewable Resource under General Economic Conditions

Listed author(s):
  • McGough Bruce

    ()

    (Oregon State University)

  • Plantinga Andrew J.

    ()

    (Oregon State University)

  • Costello Christopher

    ()

    (University of California, Santa Barbara)

Empirical evidence indicates that environmental fluctuations have important effects on fisheries production. However, existing analytical solutions of stochastic fisheries models have been produced only under highly simplified economic and biological conditions. The main contribution of this paper is to derive under general conditions a policy function for the management of a stochastic fishery. Our model includes general specifications of demand and cost relationships and a stochastic biological growth function with serially-correlated shocks. Applying methods from the theory of dynamic stochastic general equilibrium modeling and multivariate linear expectational difference equations, we derive a linear approximation of the solution to the model. Our main result is a reduced-form expression for an approximation to optimal escapement, which is shown to be a function of the current stock, past environmental shocks, and model parameters. This theoretically-grounded policy function has intuitive appeal, yields insights into comparative statics, and provides a theoretically-grounded, practical starting point for fisheries management.

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File URL: https://www.degruyter.com/view/j/bejeap.2009.9.1/bejeap.2009.9.1.2313/bejeap.2009.9.1.2313.xml?format=INT
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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 9 (2009)
Issue (Month): 1 (December)
Pages: 1-31

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Handle: RePEc:bpj:bejeap:v:9:y:2009:i:1:n:56
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  1. Singh, Rajesh & Weninger, Quinn & Doyle, Matthew, 2006. "Fisheries management with stock growth uncertainty and costly capital adjustment," Journal of Environmental Economics and Management, Elsevier, vol. 52(2), pages 582-599, September.
  2. Clark, Colin W. & Kirkwood, Geoffrey P., 1986. "On uncertain renewable resource stocks: Optimal harvest policies and the value of stock surveys," Journal of Environmental Economics and Management, Elsevier, vol. 13(3), pages 235-244, September.
  3. Homans, Frances R. & Wilen, James E., 1997. "A Model of Regulated Open Access Resource Use," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 1-21, January.
  4. Reed, William J., 1979. "Optimal escapement levels in stochastic and deterministic harvesting models," Journal of Environmental Economics and Management, Elsevier, vol. 6(4), pages 350-363, December.
  5. Sethi, Gautam & Costello, Christopher & Fisher, Anthony & Hanemann, Michael & Karp, Larry, 2005. "Fishery management under multiple uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 300-318, September.
  6. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, July.
  7. Costello, Christopher & Polasky, Stephen, 2008. "Optimal harvesting of stochastic spatial resources," Journal of Environmental Economics and Management, Elsevier, vol. 56(1), pages 1-18, July.
  8. Beddington, John R & Watts, C M K & Wright, W D C, 1975. "Optimal Cropping of Self-Reproducible Natural Resources," Econometrica, Econometric Society, vol. 43(4), pages 789-802, July.
  9. Weitzman, Martin L., 2002. "Landing Fees vs Harvest Quotas with Uncertain Fish Stocks," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 325-338, March.
  10. Bruce McGough & Andrew J. Plantinga & Bill Provencher, 2004. "The Dynamic Behavior of Efficient Timber Prices," Land Economics, University of Wisconsin Press, vol. 80(1), pages 95-108.
  11. Richard Carson & Clive Granger & Jeremy Jackson & Wolfram Schlenker, 2009. "Fisheries Management Under Cyclical Population Dynamics," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 42(3), pages 379-410, March.
  12. Mirman, Leonard J & Spulber, Daniel F, 1985. "Fishery Regulation with Harvest Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 731-746, October.
  13. Robert S. Pindyck, 1984. "Uncertainty in the Theory of Renewable Resource Markets," Review of Economic Studies, Oxford University Press, vol. 51(2), pages 289-303.
  14. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
  15. Christopher Costello & Stephen Polasky & Andrew Solow, 2001. "Renewable resource management with environmental prediction," Canadian Journal of Economics, Canadian Economics Association, vol. 34(1), pages 196-211, February.
  16. Levhari, David & Michener, Ron & Mirman, Leonard J, 1981. "Dynamic Programming Models of Fishing: Competition," American Economic Review, American Economic Association, vol. 71(4), pages 649-661, September.
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