The Spanish Hake Market: Analysis of Products and Markets Relations Comparing Several Methodologies

Abstract

The present study characterises several hake products (depending on the species, gear fished and size) in several levels of the market chain, by estimating the flexibilities and investigating the presence of market power along the value chain for these products, using both regression and cointegration methodology. The analysis is first done using regressions, and it clearly confirms the existence of a wide range of products categorised as hake. Scale flexibilities point out the existence of different luxury, normal and inferior products commercialised as hake. Own price flexibilities indicate that all products behave as inflexible goods. Cross price flexibilities demonstrate that the different hake products behave as substitutes for most of the other hake products. Cross price flexibilities also illustrate xii that different hake products may have different relationships with other fish products, and with some of them may have even stronger ones that with other hake products. The asymmetry analysis, on both price-quantity and price-transmission, also support the evidence of these different hake products¿ behaviours and it helps to explain the commercialisation process. When using regressions to deal with time series, the residuals are often correlated with their own lagged values. And this serial autocorrelation violates the standard assumption of regression theory that disturbances are not correlated with other disturbances. Hence, this correlation problem is treated mainly with four different, but related, approaches: Autocorrelation, Seasonality, Dynamic models and Non- Stationarity. From the analysis it can be seen that seasonality, and accounting lagged variables as explanatory variables in general, is an important factor to explain both prices and landings behaviour. Nevertheless, results using these approaches do not change the previous results significantly. However, recent studies have shown that traditional econometric tools (regressions) are not efficient when working with non-stationary series. Instead, cointegration methodology has been proven to be the appropriate tool to infer causal long run relationships between non-stationary time series. So, the same analysis is performed using the Johansen cointegration test; however, the results obtained show very few similarities with the results previously obtained using other methodologies. Moreover, cointegration tests tend to accept fewer relations between variables, and present a higher level of uncertainty, in both the analysis and the results. From these results, it can be concluded that hake products behave in different ways, which questions the suitability to consider hake as a proper category (that consists of all hake products). On the other hand, hake demand (in quantities and value) and prices xiii should be implemented in database and analysis with some level of product aggregation given the large number of hake products. Hence the present study also tries to find the proper aggregation groups, in which different hake products can be classed together by testing product aggregation depending on size, gear used, origin and species; because only a proper aggregation level can ensure that the behavioural properties which apply to the disaggregate relationships apply also to the aggregate relationships. The results obtained confirm that not all hake products could be aggregated together, so the suitable use of the hake category is rejected; moreover, it is shown some light on the possible aggregation groups that can be properly used. Thus, these conclusions question the results from some previous studies on seafood demand and market integration that have not taken into account the proper aggregation level, and so the existence of different product behaviours inside a category.JRC.G.4-Maritime affair