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Fleet dynamics and overcapitalization under rational expectations

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  • Da Rocha Alvarez, Jose Maria
  • Prellezo, Raul
  • Sempere, Jaume
  • Taboada-Antelo, Luis

Abstract

When individual stay/exit decisions depend on the opportunity cost of exiting, capital malleability is endogenously determined by the instruments used for stock rehabilitation. In a General Equilibrium framework, we characterize the transitional dynamics caused by stock rehabilitation policies. We show that a management policy based on input controls generates less exit, a less productive fleet, and overcapitalization, as input controls require a higher number of firms to achieve the same biological targets. Using data from the Multiannual Plan for the Western Mediterranean, we show that the use of input controls generates a Spanish fleet around 14 percent higher than the one that would result from a non distortionary instrument.

Suggested Citation

  • Da Rocha Alvarez, Jose Maria & Prellezo, Raul & Sempere, Jaume & Taboada-Antelo, Luis, 2016. "Fleet dynamics and overcapitalization under rational expectations," MPRA Paper 79578, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:79578
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    References listed on IDEAS

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    More about this item

    Keywords

    Firm dynamics; Investment; General Equilibrium; Fisheries;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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