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Fishing industry borrows from natural capital at high shadow interest rates

  • Quaas, Martin F.
  • Froese, Rainer
  • Herwartz, Helmut
  • Requate, Till
  • Schmidt, Jörn O.
  • Voss, Rüdiger

Fish stocks can be considered as natural capital stocks providing harvestable fish. Fishing at low stock sizes means borrowing from the natural asset. While fishing a particular quantity generates immediate profits and income, an interest rate has to be paid in terms of foregone future fishing income, as the fish stock's reproductive capacity remains low and fishing costs stay high. In this paper we propose to apply the concept of shadow interest rate to quantify the degree of overfishing. It incorporates the relevant biological and economic information and compares across fish stocks. We calculate the shadow interest rates for 13 major European fish stocks and find these rates to range from 10% to more than 200%. The concept of the shadow interest rate can be used to make the economic consequences of overfishing transparent and to evaluate the profitability of short-term catch reductions as investments in natural capital stocks.

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Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 82 (2012)
Issue (Month): C ()
Pages: 45-52

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Handle: RePEc:eee:ecolec:v:82:y:2012:i:c:p:45-52
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolecon

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  8. Trond Bjorndal & Jon M. Conrad, 1987. "The Dynamics of an Open Access Fishery," Canadian Journal of Economics, Canadian Economics Association, vol. 20(1), pages 74-85, February.
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