Pascal Le Floc'h by nuhman10


									 The problem of the fishery rent measure in the case of multi-productions (multi-species, multi-

                           XIIth EAFE ANNUAL CONFERENCE ESBJERG 2000

                                  Le Gallic Bertrand, Le Floc‟h Pascal
                                  CEDEM – UBO (University of Brest)
                                           12, rue de Kergoat
                                                 BP 816
                                          29285 Brest Cedex

                                EU funded project FAIR CT96-1993
                     Bioeconomic modelling of the fisheries of the English Channel

1. Justification of public management in fisheries
2. The measure of resource rent in fisheries economics
3. the measure of the resource rent in a complex artisanal fishery
         3.1. Characteristics of a single fishery
         3.2. Characteristics of a complex artisanal fishery
         3.3. Multi-productions and the exploitation of a fish stock
         3.4. Relative contributions of activities (or métiers) in a resource rent
4. Fisheries economic performance from an individual survey methodology
         4.1. Timetable of métiers and total earnings
         4.2. Earnings for share and labour costs
         4.3. Margin from variable costs
         4.4. Gross margin and fixed costs
5. Discussion

1. Justification of public management in fisheries

Fishing activity is based on exploitation of fish stocks from companies involving human and material
capital. Productions landed by each single company are a flow of catches and can be interpreted as a
combined result of the resource abundance on the one hand, and the fishing effort on the other hand. In
other words, production function for each single fishing boat is characterized by the size of material
capital (K), labour (L) and the abundance of resource stock which is exploited (this last variable is
represented by the factor B in the production function).

Theoretical foundations of public management in the field of fisheries are based on biological and
institutional aspects of marine renewable resource stocks. Given that resources are both renewable and
common, consequences in fisheries economics are important.

As living resources are, fishing resources are renewable too. In the long run, the scarcity of resource is
not defined by exploited stocks but from the biological capacity of renewal. And the resource rent is
attached to this capacity of renewal. Usually, resource rent represents the price of the natural factor (B)
in the production function (as the price of land is the discounted rent in a perfect market).

Since fish stocks are regulated by res nullius rules, this implies that fish stocks are not appropriated
before their exploitation from fishing activities. Therefore, marine renewable resource is allocated to
his producer1 (Labrot, 1996).

Exclusive individual fishing rights are unusual. Historical and technical explanations2 can be exposed
to understand this aspect. Allocating mobile fishing stocks between several users/producers appears to
be more dofficult than to enclose many parcels of land or to identify many herds (Troadec, 1994).

In addition, fish stocks are not considered as public goods (Samuelson, 1954). Their consumption is
not common, and each additional unit of species for a fisherman must be substracted from the
exploited stock by a group of producers. Scarcity of fishing stocks is a key parameter in the
characterization of marine renewable resource as a “common resource”. As a result, fishing stocks are
defined with a couple of properties, non-exclusive or the absence of individual fishing rights, and
rivalry or competition in the exploitation (Berkes and al., 1989).

The common property of fish stocks produce negative crossed externalities between fishermen
exploiting a same stock. Their individual production function are interrelated in the sense that each
fishing effort affects, through the flow of catches, the total production obtained from this stock for a
global given fishing effort.

In the fishing industry, as in other industries, externalities create a deviation between private benefit
and social benefit for a single activity.

Ceteris paribus, a part of private profit that a fisherman generates when he increases his fishing effort,
has a second face with a profit reduction for the other contestants in the fishery. In these
circumstances, a rational individual will increase his own fishing effort up to a point considered as too
high for the entire fishery.

  This does not mean a free access to the fishery : barriers to entry exist in different ways and this situation has been
generalized with the existence of exclusive economic zones (EEZ) since the end of seventies.
  Fishing development has been encouraged in an extensively manner.

An unregulated fishery is proven to be inefficient with a sub-optimal exploitation of fish stock. Given
that, resource rent which is a measure of the social wealth can be dissipated with a free entry in the
fishery. The main objective assigned to decision-makers from theoretical foundations of fisheries
economics is a restoration of this social wealth or the rent resource. (Clark, 1985 ; Hannesson, 1993).

Where problems of overexploitation and overcapitalisation are well defined in a context of efficiency,
they are also related to equity issues. The existence of negative crossed externalities and the absence of
legal individual fishing rights on the resource are the main incentives for each single producer to
increase his fishing effort. This procedure has negative impacts on the revenue of other fishermen
exploiting a same stock, and creates important sources of conflicts. The analysis is derived on the
realm of equity (more precisely the analysis of distributive effects) and can justify a public

2. The measure of resource rent in fisheries economics

The economics of fisheries have been emerging since the fifties in North America and have been
focusing on the question of tool analysis for the management of overexploitation issues. This theory
could be defined as a new field of public choice theory.

The degree of overexploitation (or sub-optimal exploitation) in a fishery is valued from bioeconomics.
Basically, this tool is based on population dynamic modelling used by biologists. Economic and
technical variables are added to this modelling (Gordon, 1954). Models of population dynamics are
implemented to study the reproduction capacity of a single stock.

Bioeconomic modelling aims to appraise related productions, for a given fishing effort. By this way, it
should estimate individual performance of fishing vessels and global performance of the fishery. Two
main relations are necessary :

 A biological relation expressing the stock dynamics with the existence of fishing mortality
 A technical relation explaining a flow of catches3 from an exploited stock of resource and
  physical/human capital.

The technical relation can be seen as a production function in the short run. In that case, the exploited
stock appears as an exogenous variable. In a context of permanent regime, the biological relation
combined with the technical relation runs into a long term production function. Therefore, dynamics of
the exploited stock is an endogenous variable (biological capacity of reproduction becomes a primary
factor and not the stock itself).

Usually, technical relationship used in bioeconomic modelling are deducted from the assumption that
anthropic factors can be synthetized through a composite index called “fishing effort”. These anthropic
factors are defined by material capital and human resources and implemented by fishermen during a
fixed period. Production (or the flow of captures) appears to be a combined result of the resource
abundance on the one hand and a given fishing effort related to the exploited stock on the other hand.

  Landings can be interpreted as total catch but generally, there are distinct in the presence of discards. This fact is assimilated
to a non desired joint prodcution. A critique adressed to the Individual Transferable Quotas as management tool is to produce
incentives for discards (cf. Copes, 1997).

The traditional bioeconomic model (Gordon, 1954) is based on the following assumptions :

-   Fishing vessels are regarded as homogeneous, with an identical production cost structure and a
    given technology
-   In a market of perfect competition, each single producer seeks this profit maximization
-   Perfect information on prices and costs is needed
-   A perfect mobility of capital is guaranteed
-   A single stock of marine renewable resource is exploited.

Figure 1. The traditional bioeconomic model

Revenue, costs

                                Total economic revenue

                         Maximum                      Total economic costs

                    EMEY             EOAE

Once it is assumed that profit maximization is the current assumption for fishermen (Bockstael and
Opaluch, 1983 ; Robinson and Pascoe, 1997), fishing companies pursue their(s) activity(ies) up to a
limit point, where marginal cost of the fishing effort equals ex-vessel unit price of the additionnal
resource. In the usual case, with a free access to the commercial stock, only anthropic production
factors (material and human capital) have a cost. The use of natural factor (B) is not paid. This
situation creates a super normal profits (or a positive economic profit). In a fishery where a single
stock is exploited, super normal profits are derived from a gap between total earnings and total
production cost. This difference is called the resource rent.

The existence of positive economic profit should attract new entrants in the fishery, under traditionally
held assumptions, and thus entry will be stopped when super normal profits will be to zero.

Total earnings equals total production cost as the free access equilibrium is stated (OAE). Fishing
entrepreneurs receive a normal profit with a normal remuneration of anthropic factors. Society as a
whole, do not benefit from any wealth from the extraction of exhaustible resource. This phenomenon
is called the dissipation of resource rent in fisheries economics.

An important fact has to be pointed out in this theoretical explanation. Entrepeneurs are supposed to
be driven in a rational manner. Each of them is motivated by profit maximization. However, this type
of behaviour involves a collective inefficiency to the level of fishery. Indeed, social marginal cost of
production will exceed the unit price of the landed resource with the existence of negative crossed

In an unregulated fishery, the dissipation of resource rent is an expected result when fishing effort
becomes too high. Restoration of resource rent could be just achieved with the introduction of fisheries
management. This is the main objective of decision-makers.

3. The measure of the resource rent in a complex artisanal fishery

In a conceptual view, the resource rent must be considered as a final objective in order to manage a
fishery efficiently. However, the measure of the rent contains many complexities. In fact, two levels of
productive systems exist in the fishery industry (Franquesa, 1993) : single fisheries (one species-one
gear) and complex fisheries (multi-species-multi-gears).

         3.1. Characteristics of a single fishery

A single fishery is described when an homogenous fleet is exploiting one single stock. Fishing strategy
and technical characteristics are the same for all boats. The measure of resource rent is directly linked
to the commercial stock and the validity of this measure is known because :

1)   Landings are important and data on catches are collected individually
2)   Prices are taken as exogenous and are formed on international market
3)   Fishing effort can be easily measured
4)   Production costs are directly related to the stock
5)   Fishing boats belong to large private/public companies ; a distinction can be made according to
     capital owner, entrepreneur (skipper as a member of crew), workers (seamen as members of crew).
     Sharing revenues does not represent a source of conflict between capital (owner) and labour
     (skipper and others fishermen).

Worlwide, single fisheries are scarce, and most of fisheries are complex in the sense of multi-species-
multi-gears. In addition, they are often closed to the coast and artisanal.

         3.2. Characteristics of a complex artisanal fishery

A multi-species-multi-gears artisanal fishery is defined as follows (Franquesa, 1993) :

-    Several commercial stocks are exploited in the same fishery
-    Several fishing gears are used to exploit different stocks of resource or a single stock
-    Heterogeneity assumption of fleets is verified
-    The fishing remuneration is based on a share system (Sutinen, 1979).
-    Artisanal fisheries mean that owners of capital are also skipper on board.

In practice, these conditions are gathered throughout tight relationships between several commercial
stocks -a group of fishing vessels which would catch a set of different species, on a wide geographical
area, and which would seek in priority target species by using particular fishing technology-.
Relationship between fishing grounds (or area), target species and gear is represented with the concept
of métier (Tétard et al 1995). A métier can be illustrated as a single activity in economics.

The three components of a fishery, companies (fishing vessels), activities (métiers), and products
(species), can be connected in different ways. Thus, these connections generate complexities as:
         A species can be targeted by several métiers
         Many species can be exploited by one single métier (with target species and by-products)
         A fishing vessel can use a set of different technologies and thus exert several métiers
            according seasonal calendar
         A métier can be done from vessels4 with different technical characteristics in the same

         3.3. Multi-productions and the exploitation of a fish stock

The existence of a resource rent depends of a commercial stock. However, a multiple of techniques
can be used to extract a common resource. Four examples are depicted in relation to space and time

                               Time One exclusive production                  Sequential productions
One single area                        A                                      B
Multiple areas                         C                                      D

In case A, fishing technology includes a set of competing in the same period and used in a common
fishery/area. For instance, the fishery of bass (Dicentrarchus labrax) is exploited by liners, seiners and
pelagic trawlers.

In case B, two competing techniques are used on a common area but delayed in time. The fishery of
anchovy (Anchoa SPP) in the gulf of Biscaye is an interesting example. Spanish traditional seiners and
french pelagic trawlers are rivals on a same fishery. Conflicts emerged at the end of eighties and an
institutionnal arrangement has been introduced between the two parts in 1992: nowadays, the two
fleets are in competition for the stock access from January to November, but traditional seiners
(Spanish essentially) can exploit anchovies from March to May (Prouzet & al., 1996).

The two other cases, C and D, illustrate a competition between different techniques on a multiple
areas, either with one exclusive production in time (C), or with sequential productions (D).

The cuttlefish (Sepia officinalis) fishery is an example of case C. In the gulf of biscaye and in the
English Channel, a multiple of fishing gears as trawling, netting and potting, are current techniques to
exploit this stock during the spring season but on different grounds.

The hake fishery (Merluccius merluccius) is a good illustration of case D. One characteristic of hake is
to have a specific spatial location dependent on its growth. Biologists point out this phenomenon as
sequential fisheries (Ifremer, 1987). In the gulf of Biscaye, four main fleets are dependent of the
european hake, netters, liners, trawlers and longliners (Guichet, 1996). Longlining and lining are used
more frequently by Spanish fishermen whereas trawling and netting are current techniques for French
fleets. Hake is a target species for netters. Trawlers are motivated with production of norway lobsters
but this species is associated in a mixed fishery with juvenile hake.

  It deals with the principal source of heterogeneity. A métier/acitivity induces a competition, on a same fishing
area, vessels belonging to different fleets with distinc technical characteristics but using an identical fishing
technology during a particular fishing season.

        3.4. Relative contributions of activities (or métiers) in a resource rent

The structure of production in fisheries is characterized by these two dimensions of time and space.
Hence, the measure of resource rent becomes inappropriate because one cannot allocate fixed cost
amongst different activities/métiers, especially in the case of multi-productions (or multi-gears-multi-
species) for a boat.

The resource rent can be approximated from the sum of individual performances for a group of fishing
vessels belonging to a same category (representing the assumption of technical homonegenity), or to
different categories n (representing the assumption of technical heterogeneity), and exploiting a
common stock, either with one single technique, or with a set of differentiated techniques. The rent is
effectively identified if the profit (sur-profit) is positive after a deduction of fixed cost including the
opportunity cost of capital from the gross profit.

It is clear, in these conditions, that the existence of resource rent is known to the level of the fleet(s)
exploiting a same stock. And an extra-marginal fishing boat is plausible. At the opposite, when an
extra-marginal vessel is identified, one cannot conclude the inexistence of resource rent. The measure
of individual performance gives only, for a group of vessels using an identical fishing technology and
targeting the same species, differential rents or quasi-rent.

Conditions in the evaluation of resource rent are met exclusively for single fisheries. But the reality
shows that usually vessels are dependent on several stocks. Landings from one single stock are only a
part of the total production/landings for a vessel.

That is why, the existence of rent is more an intuitively measure when new entrants come in a fishery.
Resource rent is also assumed when a limitation of the fishing effort is imposed by fishermen.

The resource rent, according to fisheries economics, can be described as follows :

1) It is attached to a single commercial stock
2) Its measure is derived from the difference between total earnings and total cost (including the cost
   of capital) linked to the exploitation of this single commercial stock.

With a theoretical perspective, the measure of resource rent in a multi-gear-multi-species fishery is
effective. In adding total cost of each simple production/stock, and in substracting from total earnings,
to the individual level at first, to the fishery level at last, the rent is calculated. But in the empirical
realm of multi-gears-multi-species fisheries, this type of information do not exist.

Available economic and production data on fisheries are the following :

1) Landings by species (or group of species)
2) Agreggated data on earning and cost accounting from private accounting bureau

Economic data, if they are available, give a global synthesis of the fishery performance. But the
measure of the resource rent needs an economic study from individual performances of fishing
vessels. As a result, aggregated data on earnings and costs are insufficient. A research based on micro-
data becomes necessary.

In a few articles (see for example, Coglan and Pascoe, 2000), an assessement of rent is made for a
fishery. Nevertheless, the exercise takes into account one single stock in the fishery. In this context,
aggregated costs for the whole fleet exploiting the unique commercial stock can be substracted from
the global total earnings. Difference between these two components provides an estimation of resource
rent to the fishery level.

For a multi-gears-multi-species fishery, the traditional measure of rent is only a proxy of global
performance. Relative contributions of the multiple productions/activities/métiers in the existence of a
potential resource rent cannot be considered.

Measuring the resource rent in presence of several commercial stocks in a fishery, exploited with
different fishing techniques, rises two main issues. On the first hand, measuring individual
performance is operative if relative contributions of each production/activity/métier can be identified
separately. On the second hand, as said previously fixed cost must be affected to each métier,
regarding to the relative contributions of each production to the potential existence of resource rent.
These two aspects are not easily compatible and whatever the taken option (either ignoring relative
contributions or ignoring the allocation of fixed costs), information on individual fishing strategies is
required. This information gives the opportunity to allocate variable costs to each activity. An
appropriate methodology consists in the construction of a questionnaire. Fishermen are directly
questionned on their fishing activities5.

4. Fisheries economic performance from an individual survey methodology

An individual survey methodology should be in compliance with a complete representativeness of the
studied population. Pratically, it is not possible to submit a questionnaire to an entire population of
skipper/entrepreneur/owner. Samples must be defined to take into account main homogenous fleets.

Three positive arguments can be exposed in favour of vessels in class (eg. Lenght, fishing technology).
Firstly, fisheries tools management are more valuable when different class of vessels are selected.
Secondly, each class represents a main production/activity. Vessels can belong to several
activities/métiers but it is crucial to categorize a particular fishing vessel in one box. Thirdly,
individual informations on earnings and costs are used through average values for all categories.
Behavioural strategies are specific to each group of fishing vessels and based on individual strategies.

Within a category (defined according to fishing technology and lenght), vessels are technically
homogenous, in terms of fishing strategy and cost/performance structure. However, boats from a same
category can have a set of different activities/métiers during the year.

The individual survey methodology contains four parts. The first is devoted to the identification of the
fishing strategy for a vessel belonging to a particular class (métiers/activities, fishing grounds, days at
sea, target species, size of crew). The second part concerns informations inherent to the vessel
exclusively (age, technical characteristics, purchase value, insurance value, engine, electronic material,
fishing gears). Questions on fishing behaviour and marketing are in the third part. The last and fourth
part includes questions on earnings and costs (total earnings or landings value by species, running
costs as fuel, landings cost, wages, and vessel costs as repairs, maintenance). Performance of fishing
vessels is measured from informations collected amongst a sample of skipowner. It deals with simple
fisheries or more frequently with multi-species-multi-gears fisheries (complex fisheries). Three
indicators are obtained. Firstly, variable cost are retained and the measure of performance is
synthetized in the short run with “margin from variable costs (MVC)” and “gross margin (GM)”. The
difference between these two short run performance indicators lies in variable costs are considered in
the first (MVC), and specific costs to each activity/métier are in the second (GM). Secondly, cost fixed
are included in the analysis. The final indicator in the long run is “Skipper-Owner net revenue

 This statistical failure is not specific to the French case. In other countries, individual survey methodology is
used to measure economic performance (ABARE, Magnuson Act…).

               4.1. Timetable of métiers and total earnings

Timetable of métiers/activities is built from information revealed in the first part of the questionnaire.
The objective aims at evaluating total earnings for a fishing vessel belonging to the category n, for
each métier m and for a target species or a group of target species s . In a second stage, usual
timetables are defined by category n ( n  1,...,k ) from two criteria previously cited, fishing
technology and size of lenght6.

Month Month 1            2     3      4       5     6      7     8     9     10      11    12
Days at sea
Species AP
Gear     Q
Species AP
Gear     Q
Species AP
Gear     Q
AP : average unit price – Q : quantity of a target species caught with one particular technique

Total earnings result from total landings. An important point is that the timetable of métiers allows to
identify relative contributions of each métier/activity in total production. One single production
combines a target species or a group of species and a fishing technique. The métier is known when
area is indicated (species, technique and area are the source of an activity/métier). A species might be
represented twice, if a fishing vessel uses two different techniques for exploiting a same stock of
resource (e.g. typical case is the fishery of bass or the fishery of mackerel with line, long-line, net).
Thus, productions must be separated in the sense where average unit prices are distant.

Gross earnings for vessels n with the métier m and for a species or a group of species s
                   l                                           n  1,...,k
GE n ,m , s   Ps .Ln ,m , s
                  s 1                                         m  1,...,h
                                                               s  1,...,l

GE n , m , s             is the gross earnings derived from the catches of a stock s for vessels belonging to
                         category n with the métier m
Ps                       is the ex-vessel price of the landed species s
Ln ,m , s                is the landings derived from a stock s for vessels belonging to category n with the
                         métier m

  Categories adopted in the report on French fishing activities in the Western part of the English channel are on
the one hand dredging activities and on the other hand, fixed activities (Boncoeur & al., 1999). Vessels are
ranked in three lenght classes, [6 – 10m[, [10 – 16m[, and [16 – 25m[.

In a second stage, net earnings are calculated from the difference between gross earnings and landing
costs. The average rate of the landing costs is largely dependent on size of length and métiers exerted.

NE n ,m , s  GE n ,m , s .1   n ,m , s                   n  1,...,k
                                                              m  1,...,h
                                                              s  1,...,l
NE n ,m , s            is the net earnings for vessels belonging to category n with the métier m and for a
                       specie or a group of species s
 n, m                 is the average rate of the landing costs for vessels belonging to category n with the
                       métier m

               4.2. Earnings for share and labour costs

Common expenses are imposed simultaneously to the crew and the company before a separation of
revenue for labour and capital. This system of sharing earnings is specific to the artisanal sector in
France (Davidse & al., 1997, p114). Costs included in common expenses can vary from a vessel to
another but usually costs of fuel and lube oil, bait, ice and food depict these common expenses.
EFS n ,m , s  NE n ,m , s  CE n ,m, s                       n  1,...,k
                                                              m  1,...,h
                                                              s  1,...,l
EFS n ,m , s           is the earnings for share for vessels belonging to category n with the métier m and for
                       a specie or a group of species s
CE n , m , s           is the common expenses for vessels belonging to category n with the métier m

From earnings for share, labour costs can be calculated for vessels belonging to category n, with the
métier m and for a specie or a group of species s. Information to collect are the size of the crew by
métier/activity, the crew share (a percentage of the earnings for share), total numbers of shares for
crew, and individual shares of the skipowner.

Opportunity cost of labour must be deducted because net wages can include a part of the rent when it
does exist. The calculation of labour opportunity cost is based on a daily average wage, fixed by the
national social security for professional seamen.

OCL n ,m , s  Ln ,m , s .DaS n ,m , s .DAW                   n  1,...,k
                                                              m  1,...,h
                                                              s  1,...,l
OCL n ,m , s           is the opportunity cost of labour for a crew and for vessels belonging to category n
                       with the métier m and for a specie or a group of species s
Ln ,m , s              is the size of crew for vessels belonging to category n with the métier m and for a
                       specie or a group of species s
DaS n ,m, s            is the number of days at sea for vessels belonging to category n with the métier m and
                       for a specie or a group of species s
DAW                    is the daily average wage7

 Social security for seamen in France relies on a daily average wage which is adjusted to functions and
experience of fishermen on board.

Wn ,m , s  EFS n ,m , s . n  OCL n ,m , s               n  1,...,k
                                                           m  1,...,h
                                                           s  1,...,l

W n ,m ,s             is the average cost of gross wages for vessels belonging to category n with the métier
                      m and for a specie or a group of species s
n                    is the average rate of the labour gross revenue for vessels belonging to category n

It has to be pointed out, that in complex artisanal fisheries settings (multi-gears-multi-species
fisheries), entrepeneur (skipper) is the owner of capital. In that case, skipper revenues is composed by
labour and capital revenues. Thus, labour revenue of the skipowner must be deducted in the estimation
of wages. The variable  n represents the average rate of the labour revenue for the skipowner. Labour
costs, exclusively for crew members (without the skipper) is as follows :

W ' n ,m , s  Wn ,m , s .1   n                        n  1,...,k
                                                           m  1,...,h
                                                           s  1,...,l

            4.3. Margin from variable costs

Analysis focusing on the concept of “margin from variable costs” is prefered in the short run. This
indicator reveals the more profitable or the more satisfactory activities/métiers. In a simple fishery
where a fishing vessel occupies his full time in the exploitation of a single stock of resource with an
appropriate technique, the criteria is a positive margin from variable costs. The maximization
assumption indicates that fishing vessels will continue their exclusive activity until reaching a limit
point, where marginal cost equals marginal revenue.

In a multi-gears-multi-species fishery, the maximization assumption of “margin from variable costs” is
not a generalized criteria. Fishing vessels allocate their time according to various activities/métiers.
Then, satisfacing assumption might be sometimes attained and production stopped even before
marginal cost equals marginal revenue. Individual performance for a fishing vessel belonging to a
category n, and using several fishing techniques, must be appreciated then according to his multiple

The determination of “margin from variable costs” implies a separation between variable costs and
fixed costs. A second procedure consists in an allocation of variable costs to each métier/activity.
Variable costs include common expenses (fuel and lube oil, bait, food, ice), crew share and
entrepreneur share (social insurance and fishing gears). These variable costs are specific to each
activities but an allocation-key is required for fuel cost and fishing gears. Specific costs are not similar
to variable costs because fishing right, obtained in France throughout a system of licences (not
generalized), is included in fixed cost.

                        Variables costs* (or specific costs to a métier)
            Common expenses (CE)                       Crew share         Entrepreneur share
 Fuel and       Bait         Food          Ice        Gross wages        Social      Fishing
  lube oil                                                             insurance      gears
*landing costs are not represented in this table because there are already taken into consideration to
determine net earnings.

MVC n ,m , s  EFS n ,m , s  W ' n ,m , s Varn ,m , s            n  1,...,k
                                                                   m  1,...,h
                                                                   s  1,...,l

MVC n ,m , s                  is margin from the variable costs for vessels belonging to category n with the métier m
                              and for a specie or a group of species s
Varn , m , s                  is the average cost of variable costs for vessels belonging to category n with the métier
                              m and for a specie or a group of species s, chargeable to the entrepreneur share (social
                              insurance and fishing gears).

                4.4. Gross margin and fixed costs

A second indicator of individual performance in the short run is the “gross margin”. Specific costs are
now considered (variable costs plus licence cost).

GM n ,m , s  MVC n ,m , s  Lic n ,m , s                                           n  1,...,k
                                                                                    m  1,...,h
                                                                                    s  1,...,l

Economic performance of vessels is subject to the existence or the absence of a resource rent.
Nevertheless, a commercial stock of marine resource can be exploited in using different techniques
and a multiple of métiers/activities are bound to a same stock. A more adequate indicator is the sum of
gross margins generated in different métiers (or more precisely different techniques) for a same stock.
This global indicator of the gross margin ignores consequently the problem of multi-gears-multi-
species fisheries and complexities are defined now with multi-species fisheries. It gives a mesure of
performance for a fishing vessel belonging to a category n, for a stock composed with one species or a
group of species, whatever the nature of fishing technology.

                      h                                                            n  1,..., k
GM n , s   GM n ,m , s
                  m 1                                                              s  1,..., l

GM n ,m , s                   is the average gross margin for vessels belonging to category n with the métier m and
                              for a specie or a group of species s
Lic n , m , s                 is the annual cost of the licence for vessels belonging to category n with the métier m
                              and for a specie or a group of species s
GM n , s                      is the gross margin for vessels belonging to category n and for a specie or a group of
                              species s

The last stage in the calculation of the gross margin includes total production from all fisheries visited
by fishing vessels belonging to a category n, MBn .

                  l       h                                                        n  1,...,k
GM n   GM n ,m , s
                 s 1 m 1

In the long run, fixed costs are evaluated. It deals with non specific costs to a particular activity/métier,
because a specific cost defined as a fixed cost, licence, is presented previously in the calculation of the
gross margin indicator. Non specific costs are vessel insurance, accounting costs, repairs and
maintenance, depreciation and opportunity cost of capital.

Fixed costs
Specific cost       Non specific costs
Licence             Vessel         Accounting          Repairs and Depreciation             Opportunity
                    insurance      costs               maintenance                          cost of capital

Depreciation system is based on three major components of physical capital for a fishing vessel. Hull,
engine and electronic material are these three separated components in relation with their
differentiated average lifespan. The total allowance of depreciation (De) is the sum of the separated
allowances of engine (De1), electronic material (De2) and hull (De3)8 :

De  De1  De 2  De 3

The opportunity cost of capital is the result of the insurance value, times a long term interest rate.
Uncertainties can be discussed with the choice of the long term interest rate. Thus, three simulations
are presented with different levels of interest rate in order to measure a degree of risk associated to
fishing activities.

The final indicator of vessels performance in the long run is the annual average “Skipper-Owner Net
Revenue”. The revenue includes labour revenue for the skipowner and capital revenue.

                                                                              n  1,...,k
SONR n  GM n  Fix n

SONR n              is the annual average Skipper-Owner Net Revenue for vessels belonging to category n
Fix n               is the annual average fixed costs non specific for vessels belonging to category n

    Calculation methodology is base on the following statistical estimations (Boncoeur & al., 1999) :
De1  Kw1,16 / 2.n with Kw , power units of engine and n , number of years for engine
De 2  0,2.Elec with Elec , purchased value of electronic material
De 3  0,02 .I , with I , purchased value of the fishing vessel in constant money

5. Discussion

In this paper, it is argued that the measure of the resource rent is linked to a particular stock. In the
case of a simple fishery (single-gear-single-species), non specific costs (fixed costs excepted licence)
are entirely allocated to the activity/métier. However, more generally in the world, fisheries are
complex and this category of costs cannot be shared amongst different productions made by a fishing
vessel. To the level of stock, appropriate performance indicators are “margin from variable costs” and
“gross margin”. Nevertheless, these indicators are valuable in the short run and either fixed costs are
excluded (in the calculation of the “margin from variable costs”), or non specific costs are omitted
(with the estimation of the “gross margin”). In the long run, the indicator presented in the
methodology is the “Skipper-Owner Net Revenue”. Total costs are included but the relationship with
commercial stocks is not clear because fisheries is comprised as a whole. As a result, the measure of
the resource rent is not valid.

The presented paper should not be interpreted as an attempt to measure the resource rent. However,
indicators in the short run are operative for making comparisons between different activities. The
crucial point is that positive results (with the “margin from variable costs” and “gross margin”) do not
mean the verified existence of a resource rent, but only a potenial existence. In more, motivations in
the short run can be either maximization, or satisfaction, when complex fisheries are considered. A
fishermen can maximize the “margin from variable costs” in a particular activity/métier and can be
satisfied (without a maximization behaviour) in another activity/métier. A negative result in the short
run is possible if the opportunity cost of labour (with a positive value) is included. In artisanal multi-
gears-multispecies, fishing vessels maintain simply their fishing effort in a few activities during the
slack fishing periods. Fixed costs are paid with earnings derived from more lucrative activities (a
typical case can be found with juvenile eel fisheries in France because earnings obtained from this
activity during three months can cover fixed costs on a year). That is why “margin from variable cost”
and “gross margin” can be proved negative in certain activities when opportunity cost of labour is

Measuring economic performance of fishing vessels is becoming feasible with the survey
methodology. Individual questionnaires are based on varaible costs and fixed cost on the one side, and
on a distinction between specific costs to each activity/métier and non specific costs on the other hand.
Data collection must be made in reference to the timetable of activities, describing fishing technology,
target species and areas. Performances can be evaluated in the short run in relation to one single stock
and, in the long run in relation with the whole fishery. Respectively, indicators are “margin from
variable costs” and „gross margin” in the short run, and “earnings net revenue” in the long run.

But, these performance indicators do not give a measure of resource rent for complex fisheries. An
intermediate management objective should be explored with the maximization of “gross margins” for
vessels exploiting a same stock. The problem is that fishing effort is maintained on a basis of
maximization behaviour for more profitable fisheries and probably on a basis of satisfacing
assumption in slack periods. Moreover, the existence or the absence of a rent depends to the
catchability coefficient. This parameter represents the technical progress or the state of the art in
fishing technology (Sampson, 1992). So, the influence of this factor is measured with the importance
of fixed costs and more precisely depreciation allowances and opportunity cost of capital.
Consequently, a measure of rent supposes to allocate fixed costs according to different
activities/métiers of fishing vessels. This work is a future challenge for us.


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