Income diversification and risk for fishermen

Edited by Stephen Polasky, University of Minnesota, St. Paul, MN, and approved December 12, 2012 (received for review July 17, 2012)
January 22, 2013
110 (6) 2076-2081

Abstract

Catches and prices from many fisheries exhibit high interannual variability, leading to variability in the income derived by fishery participants. The economic risk posed by this may be mitigated in some cases if individuals participate in several different fisheries, particularly if revenues from those fisheries are uncorrelated or vary asynchronously. We construct indices of gross income diversification from fisheries at the level of individual vessels and find that the income of the current fleet of vessels on the US West Coast and in Alaska is less diverse than at any point in the past 30 y. We also find a dome-shaped relationship between the variability of individuals' income and income diversification, which implies that a small amount of diversification does not reduce income risk but that higher levels of diversification can substantially reduce the variability of income from fishing. Moving from a single fishery strategy to a 50-25-25 split in revenues reduces the expected coefficient of variation of gross revenues between 24% and 65% for the vessels included in this study. The increasing access restrictions in many marine fisheries through license reductions and moratoriums have the potential to limit fishermen's ability to diversify their income risk across multiple fisheries. Catch share programs often result in consolidation initially and may reduce diversification. However, catch share programs also make it feasible for fishermen to build a portfolio of harvest privileges and potentially reduce their income risk. Therefore, catch share programs create both threats and opportunities for fishermen wishing to maintain diversified fishing strategies.

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Acknowledgments

We thank Brad Stenberg and Rob Ames for providing data support for this project, and Ron Felthoven, Mark Plummer, Phil Levin, Alan Haynie, Chris Costello, seminar participants at the University of Washington, and three anonymous reviewers for helpful comments.

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Information & Authors

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Published in

Go to Proceedings of the National Academy of Sciences
Go to Proceedings of the National Academy of Sciences
Proceedings of the National Academy of Sciences
Vol. 110 | No. 6
February 5, 2013
PubMed: 23341621

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Submission history

Published online: January 22, 2013
Published in issue: February 5, 2013

Acknowledgments

We thank Brad Stenberg and Rob Ames for providing data support for this project, and Ron Felthoven, Mark Plummer, Phil Levin, Alan Haynie, Chris Costello, seminar participants at the University of Washington, and three anonymous reviewers for helpful comments.

Notes

*We tested all trends shown in Fig. 1 for stationarity using Phillips-Perron unit-root tests and tested whether significant trends remain once the time series were differenced. The results, shown in Table S1, indicate stationary series with a deterministic time trend for the 2010 fleet, the 1981–2010 fleet, vessels with revenue between $25,000 and $100,000, vessels with mean revenue >$100,000, and the Alaskan Halibut fleet.
This dome-shaped relationship is not simply the result of an imposed functional form. It is visually apparent when looking at a scatter plot of the data and confirmed by a nonparametric kernel-weighted local polynomial smoothing regression, which provides a fit very similar to a quadratic regression (Fig. S1).
We also calculated two other diversity indices: the Shannon Diversity index, also sometimes referred to as the entropy index, defined as: , and a count of the number of fisheries a vessel has ever participated in. Although both alternative indices supported our conclusions and give qualitatively similar results, the HHI has a stronger statistical relationship with income variation than either alternative.
This article is a PNAS Direct Submission.

Authors

Affiliations

Stephen Kasperski1 [email protected]
Alaska Fisheries Science Center, National Marine Fisheries Service, National Oceanic and Atmospheric Administration, Seattle, WA 98115; and
Daniel S. Holland1 [email protected]
Northwest Fisheries Science Center, National Marine Fisheries Service, National Oceanic and Atmospheric Administration, Seattle, WA 98112

Notes

1
To whom correspondence may be addressed. E-mail: [email protected] or [email protected].
Author contributions: S.K. and D.S.H. designed research, performed research, analyzed data, and wrote the paper.

Competing Interests

The authors declare no conflict of interest.

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    Income diversification and risk for fishermen
    Proceedings of the National Academy of Sciences
    • Vol. 110
    • No. 6
    • pp. 1971-2424

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