Risk management in gathering economies

This article extends the literature on the interplay of environmental risk and welfare into the setting of coastal fisheries gathering. It reviews the sources of covariate and idiosyncratic production risk creating income shocks to gatherers and discusses the institutions that best mediate shocks across different settings. We rely upon a principal-agent framework between larva-gathering agents employed by boat-owning principals who supply seed to shrimp farms. Two datasets from a Central American fishery are used to test the hypotheses concerning contractual performance across environments. Which contract provides the highest mean income (and variation) depends upon the underlying production catch data. In the farm production records dataset with strong catch trends, a simplified relative payments contract would perform better in reducing income risk in locations of stronger covariate shocks, but at the price of significantly lower mean earnings for gatherers. In areas of idiosyncratic shocks, such as localised water pollution, piece-rate contracts would perform better. Objective risk exposure to gatherers was lower under relative payments, supporting the hypotheses. Actual results in the Honduran case were conditioned by imperfect labour markets and the substitutability of hatchery larva.