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


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.

Continue Reading


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.

Supporting Information

Supporting Information (PDF)
Supporting Information


; Bureau of Labor Statistics National Census of Fatal Occupational Injuries in 2010 (Preliminary Results) (US Department of Labor, Washington, DC, 2011).
SA Sethi, Risk management for fisheries. Fish Fish 11, 341–365 (2010).
HP Binswanger, MR Rosenzweig, Behavioural and material determinants of production relations in agriculture. J Dev Stud 22, 503–539 (1986).
H Alderman, CH Paxson Do the Poor Insure? A Synthesis of the Literature on Risk and Consumption in Developing Countries (World Bank Publications, Washington, DC, 1992).
CH Paxson, Using weather variability to estimate the response of savings to transitory income in Thailand. Am Econ Rev 82, 15–33 (1992).
MR Rosenzweig, HP Binswanger, Wealth, weather risk and the composition and profitability of agricultural investments. Econ J 103, 56–78 (1993).
MR Rosenzweig, KI Wolpin, Credit market constraints, consumption smoothing, and the accumulation of durable production assets in low-income countries: Investments in bullocks in India. J Polit Econ 101, 223–244 (1993).
RM Townsend, Risk and insurance in village India. Econometrica 62, 539–591 (1994).
J Morduch, Income smoothing and consumption smoothing. J Econ Perspect 9, 103–114 (1995).
RM Townsend, Consumption insurance: An evaluation of risk-bearing systems in low-income economies. J Econ Perspect 9, 83–102 (1995).
EO Heady, Diversification in resource allocation and minimization of income variability. J Farm Econ 34, 482–496 (1952).
S Johnson, A re-examination of the farm diversification problem. J Farm Econ 49, 610–621 (1967).
SC Blank, Producers get squeezed up the farming food chain: A theory of crop portfolio composition and land use. Rev. Agr. Econ 23, 404–422 (2001).
DN McCloskey, English open fields as behavior towards risk. Res Econ Hist 1, 124–171 (1976).
PR Miller, et al., Pulse crop adaptation in the northern Great Plains. Agron J 94, 261–272 (2002).
DW Bromley, JP Chavas, On risk, transactions, and economic development in the semiarid tropics. Econ Dev Cult Change 37, 719–736 (1989).
JB Nugent, N Sanchez, Common property rights as an endogenous response to risk. Am J Agric Econ 80, 651–657 (1998).
GD Thompson, PN Wilson, Common property as an institutional response to environmental variability. Contemp Econ Policy 12, 10–21 (1994).
FH Sanderson, A specific-risk scheme for wheat crop insurance. J Farm Econ 25, 759–776 (1943).
HG Halcrow, Actuarial structures for crop insurance. J Farm Econ 31, 418–443 (1949).
MJ Miranda, Area-yield crop insurance reconsidered. Am J Agric Econ 73, 233–242 (1991).
DL Hueth, WH Furtan Economics of Agricultural Crop Insurance: Theory and Evidence (Springer, New York, 1994).
J Greenberg, M Herrmann, H Geier, C Hamel, Wild salmon risk management in Bristol Bay. Final Report to the Risk Management Agency of the US Department of Agriculture (Washington, DC, p 385. (2002).
D Ludwig, A quantitative precautionary approach. Bull Mar Sci 70, 485–497 (2002).
M Herrmann, J Greenberg, C Hamel, H Geier, Extending federal crop insurance programs to commercial fisheries: The case of Bristol Bay, Alaska, sockeye salmon. N Am J Fish Manage 24, 352–366 (2004).
J Mumford, A Leach, P Levontin, L Kell, Insurance mechanisms to mediate economic risks in marine fisheries. ICES J Mar Sci 66, 950–959 (2009).
J van Oostenbrugge, E Bakker, W Van Densen, M Machiels, P Van Zwieten, Characterizing catch variability in a multispecies fishery: Implications for fishery management. Can J Fish Aquat Sci 59, 1032–1043 (2002).
M Minnegal, PD Dwyer, Managing risk, resisting management: Stability and diversity in a southern Australian fishing fleet. Hum Organ 67, 97–108 (2008).
CL Smith, R McKelvey, Specialist and generalist: roles for coping with variability. N Am J Fish Manage 6, 88–99 (1986).
R McKelvey, The fishery in a fluctuating environment: Coexistence of specialist and generalist fishing vessels in a multipurpose fleet. J Environ Econ Manage 10, 287–309 (1983).
R Hilborn, JJ Maguire, AM Parma, AA Rosenberg, The Precautionary Approach and risk management: Can they increase the probability of successes in fishery management? Can J Fish Aquat Sci 58, 99–107 (2001).
FN Baldursson, G Magnusson, Portfolio fishing. Scand J Econ 99, 389–403 (1997).
JN Sanchirico, MD Smith, Trophic portfolios in marine fisheries: A step towards ecosystem management. Selected Paper (American Agricultural Economics Association Annual Meetings, Montreal, 2003).
SF Edwards, JS Link, BP Rountree, Portfolio management of wild fish stocks. Ecol Econ 49, 317–329 (2004).
L Perruso, RN Weldon, SL Larkin, Predicting optimal targeting strategies in multispecies fisheries: A portfolio approach. Mar Resour Econ 20, 25–45 (2005).
JN Sanchirico, MD Smith, DW Lipton, An empirical approach to ecosystem-based fishery management. Ecol Econ 62, 586–596 (2008).
SA Sethi, M Dalton, R Hilborn, MJ Rochet, Quantitative risk measures applied to Alaskan commercial fisheries. Can J Fish Aquat Sci 69, 487–498 (2012).
DE Schindler, et al., Population diversity and the portfolio effect in an exploited species. Nature 465, 609–612 (2010).
DS Holland, JJC Ginter, Common property institutions in the Alaskan groundfish fisheries. Mar Policy 25, 33–42 (2001).
D Holland, E Gudmundsson, J Gates, Do fishing vessel buyback programs work: A survey of the evidence. Mar Policy 23, 47–69 (1999).
R Felthoven, Effects of the American Fisheries Act on the harvesting capacity, capacity utilization, and technical efficiency of pollock catcher-processors. Mar Resour Econ 17, 181–205 (2002).
RE Curtis, D Squires Fisheries Buybacks (Wiley-Blackwell, Ames, IA, 2007).
; National Research Council Ocean Acidification: A National Strategy to Meet the Challenges of a Changing Ocean (National Academies, Washington, DC, 2010).
OC Herfindahl, Comment on Rosenbluth’s measures of concentration. Business Concentration and Price Policy, ed G Stigler (Princeton Univ Press, Princeton, 1955).
AO Hirschman, The paternity of an index. Am Econ Rev 54, 761–762 (1964).
EH Simpson, Measurement of diversity. Nature 163, 688 (1949).
CA Montgomery, H Singh, Diversification strategy and systematic risk. Strateg Manage J 5, 181–191 (1984).
Squires D, Vestergaard N Technical change and the commons. Rev Econ Stat, in press.
S Tveterås, et al., Fish is food—the FAO’s fish price index. PLoS ONE 7, e36731 (2012).
TE Essington, Ecological indicators display reduced variation in North American catch share fisheries. Proc Natl Acad Sci USA 107, 754–759 (2010).
; Committee for Fisheries Development Towards Sustainable Fisheries: Economic Aspects of the Management of Living Marine Resources (Organization for Economic Cooperation and Development, Paris, Chapter 4. (1997).
C Costello, SD Gaines, J Lynham, Can catch shares prevent fisheries collapse? Science 321, 1678–1681 (2008).
DW Bromley, Abdicating responsibility: The deceits of fisheries policy. Fisheries (Bethesda, Md) 34, 280–290 (2009).
M Lubatkin, S Chatterjee, Extending modern portfolio theory into the domain of corporate diversification: Does it apply? Acad Manage J 37, 109–136 (1994).
LE Palich, LB Cardinal, CC Miller, Curvilinearity in the diversification-performance linkage: An examination of over three decades of research. Strateg Manage J 21, 155–174 (2000).

Information & Authors


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


Submission history

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


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.


*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.



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


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.

Metrics & Citations


Note: The article usage is presented with a three- to four-day delay and will update daily once available. Due to ths delay, usage data will not appear immediately following publication. Citation information is sourced from Crossref Cited-by service.

Citation statements



If you have the appropriate software installed, you can download article citation data to the citation manager of your choice. Simply select your manager software from the list below and click Download.

Cited by


    View Options

    View options

    PDF format

    Download this article as a PDF file


    Get Access

    Login options

    Check if you have access through your login credentials or your institution to get full access on this article.

    Personal login Institutional Login

    Recommend to a librarian

    Recommend PNAS to a Librarian

    Purchase options

    Purchase this article to get full access to it.

    Single Article Purchase

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







    Share article link

    Share on social media