Caps on working hours per vessel: A general equilibrium analysis

Abstract

General equilibrium analysis shows that regulation based on caps on working hours per vessel affect the entry/exit margin (more low productivity vessels stay in the fishery), wages (a less productive fleet implies lower equilibrium wages) and aggregate employment allocated to the sector. Although the total number of vessels increases, total employment in the fishery is reduced and the aggregate rents generated in the fishery are lower. Moreover, regulatory policies based on input controls also affect capital dynamics across the stock recovery phases. In comparison with a fishery regulated via efficient instruments, we find that those dynamics are characterized by fewer exits of vessels. Finally, using data from the Western Mediterranean Sea, we show that the use of input controls gives rise to a Spanish fleet around 14 percent larger than the one that would result from a non-distortionary instrument