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

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  • Englander,Aaron Gabriel Ratliffe
  • Zhang,Jihua
  • Villaseñor-Derbez,Juan Carlos
  • Jiang,Qutu
  • Hu,Mingzhao
  • Deschenes,Olivier
  • Costello,Christopher

Abstract

Input subsidies in natural resource sectors are widely believed to deplete the natural capitalon which these sectors depend. However, estimating the causal effect of subsidies on resource extraction has beenstymied by identification and data challenges. China’s fishing fleet is the world’s largest, and in 2016 thegovernment changed its fuel subsidy policy for distant water vessels to one that increases with predetermined vesselcharacteristics. Regression discontinuity estimates imply a long-run elasticity of fishing hours with respect to fuelsubsidies of 2.2. Consequently, reducing Chinese fuel subsidies by 50 percent could eliminate biological overfishing in several ocean regions. By demonstrating thesubstantial impact of fuel subsidies on fishing activity and fish stocks, the findings inform ongoing subsidy reform inChina, other nations with subsidized fishing vessel fuel, and the World Trade Organization.

Suggested Citation

  • Englander,Aaron Gabriel Ratliffe & Zhang,Jihua & Villaseñor-Derbez,Juan Carlos & Jiang,Qutu & Hu,Mingzhao & Deschenes,Olivier & Costello,Christopher, 2023. "Input Subsidies and the Depletion of Natural Capital : Chinese Distant Water Fishing," Policy Research Working Paper Series 10412, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10412
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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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