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Journal of Bioeconomics 4: 163181, 2002

# 2002 Kluwer Academic Publishers. Printed in the Netherlands.

A Review of Selected Bioeconomic Models with


Environmental Inuences in Fisheries
DUNCAN KNOWLER
School of Resource and Environmental Management, Simon Fraser University, 8888 University Drive, Burnaby
B.C. V5A 1S6, Canada (djk@sfu.ca)
Synopsis: Bioeconomic models are integrated economic-ecological models, with all the advantages and
disadvantages of such models. Most bioeconomic modelling seeks appropriate levels of stock and catch to
assist resource managers, normally with environmental conditions assumed constant. However, bioeconomic
models can be used to analyse the welfare effects of changes in environmental quality as well. This latter
application is the subject of this review. The review concentrates on the commercial harvesting of sh stocks,
where population dynamics are inuenced by environmental quality. In the rst part of the paper, the basic
static and dynamic bioeconomic models are described and then extensions are considered that take account of
the inuence of environmental quality on habitat and, by inference, on sustainable catch levels and measures
of economic surplus. The second part of the paper describes a series of case studies from the empirical
bioeconomic literature that apply some of the theoretical innovations described earlier.
Key words: dynamic, marine, open access, optimal management, static, economic valuation
JEL classication:

Q0, Q2

Introduction
Bioeconomic modelling in sheries integrates economic and biological inuences
with the goal of assisting natural resource managers in determining appropriate levels
of stock and catch. Normally, such models assume environmental conditions in the
ambient marine ecosystem remain constant, but this need not be so. Given the complexity of ecosystem functioning, the depiction of ecological systems within bioeconomic
models is inevitably simplistic and this has led to criticism (Perrings et al. 1995, Van der
Ploeg et al. 1987). Since analytical models with more than a few variables quickly
become intractable, restricting the interaction with the environment to a few equations
is also an appealing feature of bioeconomic models. That said, recent interest in nonlinearities, discontinuous change, critical thresholds and ecosystem stability, has
revealed new opportunities for bioeconomic modelling from an ecological perspective
(Perrings & Pearce 1994, Perrings et al. 1992, Common & Perrings 1992, Perrings 1991,
Holling 1973). Modications to the basic bioeconomic model to capture some of the
above concerns exist, including the integration of stochastic elements (Costello et al.
2001, Johnston & Sutinen 1996, Reed 1988, Andersen & Sutinen 1984). For surveys of
the conventional bioeconomic model, see Eggert (1998), Conrad (1995), Munro (1992),
Clark (1985, 1990), Munro & Scott (1985) and Wilen (1985).

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An added feature of bioeconomic models is their usefulness in analyzing changes


in natural resource management policies (e.g. land use), or estimating the welfare
effects of modications in environmental quality. This latter application in the eld
of sheries economics is the subject of this review. Using bioeconomic modelling to
analyze changes in environmental quality requires consideration of the institutional or
property rights regime governing management of the shery. Under open access,
entry and exit from the shing industry is unrestricted, so that shing effort expands
to the point where natural resource rents in the shing industry are reduced to zero.
With optimal management, the economic returns to the shery are maximised, either by
a sole owner, a planning agent or through collaboration on the part of many diverse
harvesters. In between are various mixed regimes, such as regulated open access
(Homans & Wilen 1997). As this review will show, correctly capturing the welfare
effects of changes in environmental quality using a bioeconomic framework relies on a
proper specication of this institutional regime. For example, Freeman (1991) points
out that under open access there is little scope for long run producer welfare benets
from improvements in environmental quality, since potential economic gains may be
dissipated.
The review concentrates on the commercial harvesting of sh stocks whose population dynamics are inuenced by environmental quality, ignoring recreational and
other values associated with these stocks and their habitats.1 Modelling the latter values
as a function of the standing stock of the resource can be accommodated within the
bioeconomic framework (see Hartmann 1976). However, the focus differs when analyzing the welfare effects of environmental change. Commercial harvesting can be
analyzed using the conventional tools of production analysis, with environmental
quality appearing as a factor of production subject to a derived demand. In models
with recreational and other standing stock-related benets, environmental quality
appears instead as an argument in the utility function, requiring a different set of
techniques for welfare measurement when environmental quality changes (Maler
1992). Even in this latter case, the physical link between environmental quality and
the dynamics of natural populations will need to be captured as part of the modelling
exercise.2
The rst part of the paper begins with the basic static model described in the sheries
literature and then looks at extensions that take account of the inuence of environmental quality on habitat and by inference, on natural populations of sh. Then a
dynamic formulation of the basic model is presented, initially without environmental
inuences and then with these included. Also considered are the welfare results under
different model formulations, taking into account property rights. The second part of
the paper presents case studies from the empirical literature illustrating the modelling
of environmental inuences in commercial sheries.
The static bioeconomic model with environmental quality
Theoretical modelling that integrates biological and economic considerations within a
simple static formulation dates back at least several decades, and is intricately linked

A REVIEW OF SELECTED BIOECONOMIC MODELS

165

with the economic analysis of commercial sheries (Munro 1992). An understanding of


these basic techniques is necessary at the outset, since most models of natural populations that incorporate environmental inuences are simply extensions of these basic
models. As a result, the rst section below provides a brief description of the basic
bioeconomic model in its static form and the following section considers extended
models incorporating environmental inputs in the growth of a harvested natural
population. The basic static model is well-documented in standard texts so that only
a brief overview is presented here (see Clark 1985, Anderson 1977). If possible, the
model notation used in the original research is retained.
The standard static bioeconomic model
Static bioeconomic models may be of the short run (single period) prot maximization
type or long run equilibrium models. One familiar form is referred to as the SchaeferGordon model, after the contributions of this biologist and economist, respectively
(Schaefer 1957, Gordon 1954). The model consists of stock growth, harvest and prot
functions, and in the simplest case these take the following form:
F X rX 1
h qEX
p ph

cE

where X is the stock size, r is the intrinsic growth rate of the harvested population,
K is the harvested population's natural equilibrium size or the system's carrying
capacity, h is harvest, q measures the efciency of the shing eet or the catchability
coefcient, E is the harvesting effort, p is prots and p and c are the output and effort
prices, respectively.
The rst equation in (1) is a logistic stock growth function and its shape relies on the
two biological parameters, r and K. The Schaefer harvest function is the second
equation in (1) and it relies on a simple multiplicative relationship between stock, effort
and catchability.3 Finally, (1) includes a standard prot expression comprising harvest
revenues less harvesting costs.
Ignoring stock growth, the following simple short run prot maximizing condition
can be derived for a given stock size X0 :
p

c
qX0

Expression (2) states the standard result that effort should be expended, and harvest
taken from a stock of xed size, up to the point where price equals marginal cost.
A more realistic static model would take into account resource renewal and
incorporate stock growth. Still maintaining a prot-maximizing stance, but assuming

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a sustained yield is to be harvested, a sustained yield curve dening all points where h
equals F(X) can be generated. Equating the rst two expressions in (1) and then
substituting the resulting expression into the harvest function yields:
h qKE

q2
KE 2
r

Expression (3) denes a sustained yield curve in harvest-effort space that is parabolic in
shape. The curve has its maximum at K/2, a point also known as the maximum
sustainable yield (MSY). The prot maximizing combination of inputs X and E is
now easily determined using (3) and the prot function in (1).
Gordon (1954) shows that in the absence of entry limitations, total revenues and
costs will eventually equilibrate and all resource rent will be dissipated. He refers to this
situation as the `bionomic equilibrium'. Under open access, the equilibrium stock size
can be determined by setting the prot function from (1) equal to zero and then solving
for the stock variable. In the basic Schaefer-Gordon model, this leads to an equilibrium
stock size of:
X1

c
pq

where the symbol 1 signies that this is an open access equilibrium.


Static models with environmental quality
Several authors have extended the basic static sheries model to include the role of an
environmental input in stock determination and derive appropriate welfare measures
for changes in the supply of the environmental input. Ellis & Fisher (1987) construct a
model and later apply it to the blue crab (see below). At rst glance, their use of the basic
static sheries framework is not obvious, since it relies upon simplifying assumptions
about the marginal productivity of habitat in contributing to sheries production. Ellis
& Fisher (1987) set up the problem in cost minimization terms and use the following
Cobb-Douglas production function to describe catch:
Q AX1a X2b

where Q is catch, X1 is harvesting effort, X2 is the xed environmental input (as


designated by a bar overhead) and A, a and b are parameters. In addition, they
hypothesize a downward-sloping inverse demand curve facing the industry with
constant elasticity:
P K 1=m Q

1=m

where P is output price, K is a parameter and m is the constant elasticity of demand.

A REVIEW OF SELECTED BIOECONOMIC MODELS

167

The authors use (5) and W, the unit wage paid to harvesting effort X1 , to derive a
marginal cost function. In keeping with standard prot-maximization, marginal cost is
then set equal to the market price determined by (6) and the resulting expression is
rearranged to give a statement for the equilibrium level of harvest:
Q

ha
K 1=m A1=a X2
W

b=a

ima=m1

ma

where Q is the equilibrium level of harvest. Using (7), they derive statements for the
change in consumers' and producers' surplus as the environmental variable X2 changes.
While the result portrayed in (7) appears complex, under certain parameter assumptions it is equivalent to the basic static sheries model result contained in (2), with the
addition of an environmental inuence on stock growth. Freeman (1991) extends
the Ellis & Fisher (1987) analysis to the open access situation and demonstrates that
net social returns are not necessarily lower under open access. In the end, the EllisFisher-Freeman models make the important points that static bioeconomic models can
take account of environmental inuences and they can capture the welfare effects from
environmental change correctly, but this requires explicit consideration of the institutional arrangements governing the shery.
Kahn (1987) provides a second static model incorporating an environmental inuence on the harvesting of a natural population. He assumes the resource manager can
control the level of an environmental input affecting a natural population but not the
level of harvesting effort and, therefore, he models bioeconomic equilibrium. Kahn's
approach is based on conventional production economics under conditions of open
access, with average cost and inverse demand functions specied as:
AC ACC, ri , X
Y

C, rs , S

where AC is the
Q average harvesting cost, C is the harvest, ri is a vector of input prices, X
is stock size, is the price in an inverse demand function, rs is a vector of substitute
good prices and S is a vector of socioeconomic characteristics of the relevant population.
Environmental inuences enter the model via stock determination. The model's
population dynamics are specied using a logistic function and it is assumed that the
stock is subject to sustained yield harvesting:


X
C rX 1
9
K
where r and K are the intrinsic growth rate and population carrying capacity, respectively. By assuming steady state harvesting, Kahn need not include a distinct
harvest production function. Environmental quality may inuence carrying capacity
K, or the intrinsic growth rate r, or both variables.4 Kahn models K as a function of
environmental variables qi , expressing this as K f qi. He then derives a reduced

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KNOWLER

form model by substituting the latter relationship into the logistic stock growth
function. With catch now expressed in terms of stock and environmental variables,
expression (9) can be substituted into the average cost and inverse demand curve
statements contained in (8).
Kahn demonstrates how the welfare effects of changes in environmental quality can
be estimated from his model. Critical to his approach is the differentiation of the welfare
effects stemming from environmental change from those resulting from unrelated
changes in harvesting. However, the model captures adjustments in harvesting which
are in response to the environmental quality change, since harvesters will modify their
level of effort to restore bioeconomic equilibrium under the new circumstances. Kahn
begins with the following expression for the annual net benets under constant environmental conditions:
C


annual net benefits

hY

i
MC dC

10

where C  is the optimal


Q catch satisfying the bionomic equilibrium condition that
equates AC and price , and MC is the marginal harvest cost. With stock growth
dened as a function of environmental variables, changes in consumers' and producers'
surpluses can be assessed by taking the difference between annual net benets before
and after the change in environmental quality.
McConnell & Strand (1989) also measure the welfare effects of improvements in
environmental quality in the static model, but under differing management regimes and
when demand conditions matter.5 The authors argue that environmental quality can
inuence demand as well as supply, since consumers have been shown to respond to
differing perceived levels of sh quality, dictated by ambient water quality in harvesting
areas. Under optimal management, where environmental quality inuences stock
growth and demand, an improvement in quality shifts the marginal cost downwards
and the demand curve upwards so that welfare unequivocally increases but the change
in price is indeterminate. Where the shery is subject to open access and the supply
curve is the backward bending average cost curve (Copes 1970), the welfare effect of an
environmental improvement is less straightforward. Given this shape of the supply
curve, the new equilibrium harvest level may be much lower at the post-change price,
resulting in a consumers' surplus that is smaller than before the change. The consequences of this result are substantive, as under open access and environmentally
sensitive demand, an improvement in environmental quality may have negative welfare
effects.
The dynamic bioeconomic model with environmental quality
When dealing with natural populations it is generally more satisfactory to use a
dynamic specication. Static models take no account of the process of adjustment by
which an optimal stock size is attained, for instance. Often this process can be of great

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A REVIEW OF SELECTED BIOECONOMIC MODELS

importance for policy implementation: whether a moratorium is instituted on harvesting to allow the most rapid restoration of stocks or this is allowed to take place
gradually is not a trivial matter to those doing the shing and, by inference, to resource
managers. Moreover, the discount rate is totally ignored in the static model and yet its
importance cannot be underestimated in addressing environmental and resource
issues. In fact, the optimal stock size for a given shery will vary depending on whether
a static or dynamic approach is used if the discount rate is not zero. Again, the
proliferation of descriptions of the basic dynamic model make it unnecessary to go
into great detail here, so only a thumbnail sketch of the model is provided (see the
sources cited earlier, especially Munro 1992 and Clark 1990).
The standard dynamic bioeconomic model
To restate the bioeconomic model in dynamic terms requires the use of optimal control
theory whereby variables such as harvest, shing effort and sh stock are expressed as
functions of time.6 A general formulation of the dynamic problem in continuous time,
allowing for linear and non-linear functional forms and assuming downward sloping
demand, might look as follows:
8
9
1
< h
=
max
phtdh Cht, X t e dt dt
:
;
0

dX
X_ F X t
dt
ph < 0, Ch > 0, CX < 0
subject to:

ht, X 0 given
11

where h(t) is the harvest at time t, p[h(t)] is a downward sloping inverse demand
function, X(t) is the resource stock at time t, C[h(t),X(t)] is the cost function, F[X(t)]
is the stock growth function and d is the discount rate. Note that increasing the harvest
raises total costs while higher levels of the resource stock reduce costs. In optimal
control terminology, harvest h constitutes the variable subject to manipulation or
control, while X represents the stock affected by the control variable h and is referred
to as the state variable. The objective function in (11) is subject to a biological constraint
or equation of motion, which describes growth in the state variable X as the natural
stock growth F(X) less any harvest h.

Dropping reference to time and representing p[h(t)]dh as D(h), the problem posed
by (11) is solved by rst formulating the current value Hamiltonian:
~ X , h; l Dh
H

Ch, X lF X

12

where l is the adjoint or costate variable and other variables and functions are as
dened previously.
The rst order conditions associated with a maximum of the Hamiltonian expression
in (12) can be used to derive a differential equation system dening the optimal time

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KNOWLER

paths of h and X. Assuming that a long run equilibrium or steady state exists, then this
equation system can be used to nd the steady state solution values for h and X.
The procedure described above pertains to the case where a sole owner or manager of
the resource maximises resource rents. With open access, an alternative procedure is
required in recognition that unrestricted entry and exit from the industry leads to the
dissipation of economic rents in the long run. This procedure captures the response of
harvesters to changing prot conditions using an expression for adjustments in harvesting capacity in place of the objective function in (11). In its simplest form, the following
multiplicative specication for this adjustment process is used (Smith 1969):
E_ kp

13

where k is a scalar adjustment factor and p is industry prots. With this approach, it is
assumed that entry and exit are constrained in various ways (e.g. vessel construction
lags), so that the dissipation of existing resource rents is not accomplished instantaneously. Assuming capital is malleable, k might take different values depending upon
whether current period prots are positive or negative (Bjorndal & Conrad 1987).
Other more complex formulations of the adjustment process are possible (Berck &
Perloff 1984), including the use of game theory approaches (see Sumaila 1997).
Expression (13) and the equation of motion from (11) comprise a system of two rst
order differential equations that can be solved for the open access equilibrium by
iterating forward from initial conditions X(0) and E(0). In effect, a simulation procedure is employed that may converge to a steady state solution. A discrete time specication produces more complex dynamics, including deterministic chaos (Conrad 1995).
Dynamic models with environmental quality
Freeman (1993) extends the basic dynamic bioeconomic model in (11) by including an
additional explanatory variable q, representing an environmental inuence. He connes his analysis to the simple case where environmental quality is not subject to control
and changes in environmental quality occur exogenously. Thus, q can be treated as a
xed factor of production or even as a parameter, as indicated by an overhead bar on
this term. To avoid added complexity only this simple case is presented below.7
Using the standard formulation for a dynamic bioeconomic system, Freeman
hypothesises an environmental inuence affecting both the cost function and stock
growth. The optimal management version of the problem can be presented as:
8
9
1
< h
=
max
phtdh Cht, X t, q e dt dt
:
;
0

subject to:

dX
X_ F X t, q ht, X 0 given
dt
ph < 0, Ch > 0, CX < 0, Cq > 0

14

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A REVIEW OF SELECTED BIOECONOMIC MODELS

where all variables, parameters and functions are identical to those used in (11) except q,
which is the xed environmental input. The current value Hamiltonian for (14) is:

H X , h;l Dh

Ch, X , q lF X , q

15

and the rst order conditions describing the maximum of the system are identical to
those for (11) except that now the equation of motion contains q as an argument. The
system can be solved for a given initial stock level X(0) and xed level of the environmental input q. Optimal time paths for the critical variables will depend on q as will the
solution values for the system at its steady state. Thus, when designated as a xed
production factor and not subject to control, the presence of an environmental inuence does not alter the procedure for solving the dynamic bioeconomic problem.
The comparative dynamics of a non-marginal change in environmental quality in the
dynamic model are of particular interest. As in the static case, the social returns from
optimal harvesting are determined for the situation without a change in environmental
quality and then compared to the social returns with the change. The difference
represents the welfare effect of the change. Altering the environmental input has
implications for the optimal harvest rate and stock level in each period, so that these
might be expected to differ in the with and without scenarios, as would the associated
consumers' and producers' surpluses. Ellis & Fisher (1987) show the proper formulation for estimating the relevant welfare effect in the dynamic model, assuming an
innite time frame and optimal management:
1

DW

CS
q PS
q e
0

dt

dt

CSq0 PSq0 e

dt

dt

16

where W measures welfare in economic terms; CS and PS are consumers' and producers' surpluses, respectively; and 0 and 1 refer to the values of the environmental quality
variable q without and with the change, respectively.
If open access harvesting conditions exist with an environmental inuence present,
then the dynamic model comprises the two equation system described earlier, but now
one or both system equations will contain q as an argument. When simulated from
initial conditions, the system's behavior will depend on the value of this term. As a
result, a change in environmental quality will lead to time paths for key variables that
diverge from the no-change scenario and the welfare change associated with these
divergent paths can be assessed. If demand relies on environmental quality, then a
problem also found with the static model can be anticipated: changes in environmental
quality might be expected to have little or even negative welfare effects in an efciency
sense, depending upon the elasticity of demand (Freeman 1991).
Case studies of bioeconomic modelling with environmental inuence in sheries
Relatively few studies have estimated the effects of changing environmental conditions
on harvested populations, and most that do are of the static variety. Bell (1972) was one

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KNOWLER

of the rst to incorporate a habitat variable into an empirical model of a shery, but the
inuence was water temperature and not a variable typically subject to control by
management. More recent efforts can be grouped according to the type of inuence
analyzed. Several static analyses have considered the outright loss of habitat, perhaps
integrated into a broader analysis of the economics of land use conversion. In contrast,
another group of static analyses examines modications in habitat quality brought
about by pollution externalities (e.g. nutrient and suspended sediments) and altered
salinity levels. Several applied studies incorporate dynamic considerations, but because
applied dynamic modelling is more difcult and demanding of data, there are far fewer
examples than for the static case. An example drawing on recent modelling of sheries
and pollution in the Black Sea is described below.
Applied static bioeconomic models with habitat loss
All of the studies reviewed in this section are concerned with valuing the loss of coastal
wetland or mangrove habitat that is converted to alternative land uses or destroyed in
other ways. One study analyzes the Florida Gulf Coast blue crab shery, which relies on
threatened coastal mangrove forests as breeding habitat. Using this habitat as the
environmental input, Lynne et al. (1981) derive a simple static equilibrium model for
the blue crab shery. They dene the maximum potential crab stock or habitat carrying
capacity as a linear function of the natural logarithm of the mangrove area. Making this
substitution, the equation used for estimating the link between catch and mangrove
area in reduced form is:
Ct b0 b1 ln Mt 1 Et

b2 ln Mt 1 Et 2 b3 Ct

et

17

where C is catch, M is mangrove area, E is catch effort (as measured by the number of
crab traps set) and et is an error term. Subscripts refer to time periods and help in
distinguishing lagged mangrove area and catch, which are retained in the nal equation. Taking the relevant partial derivative for catch with respect to marsh area and then
multiplying this by the dockside price of crab yields an implicit value for the marsh area.
Ellis & Fisher (1987) point out that the resulting values do not adhere to welfare
measurement involving consumers' and producers' surplus.
In a similar study, Barbier & Strand (1998) examine the linkage between shrimp
production and mangrove habitat in the Bay of Campeche, Mexico. Harvesting of
shrimp by artisanal and industrial vessels is an important regional economic activity,
but is subject to open access. Over the period 19801990, the mangrove area declined by
2.3% as a result of expanding economic activity in the area. As in Lynne et al., Barbier &
Strand (1998) use a basic Schaefer-Gordon static equilibrium model with carrying
capacity expressed as a linear function of the mangrove area. They arrive at the
following reduced form catch equation, which is similar to that of Lynne et al.:
ht b1 Mt Et

b2 Et2 et

18

A REVIEW OF SELECTED BIOECONOMIC MODELS

173

where h is the shrimp catch, M is the mangrove area, E is a composite harvesting effort
variable and et is the error term. Using data for the period 198091, regression estimates
were made for the composite parameters b1 and b2 . Similarly to Lynne et al., Barbier &
Strand nd statistically signicant interactive effects, conrming that habitat and effort
do not inuence catch independently.
Using the estimated relationship, the authors derive the comparative static effects of
changes in mangrove area. Setting prots at zero, consistent with an open access
management regime, they nd that a one unit decrease in mangrove area (per km2 )
results in an average reduction in annual shrimp harvests of 14.4 mt and a loss in
revenues of US$ 140 000 per year (1982 prices). This marginal valuation is contingent
upon the level of harvesting effort and diminishes as the level of effort increases. Thus,
the marginal impact of mangrove loss actually declines from 18.6 mt per year to 8.4 mt
over the period studied, reecting a steadily increasing level of effort.
Applied static bioeconomic models with habitat quality modications
Fish catches may be affected by changes in habitat quality as well, either directly or via
intermediary processes such as eutrophication, the loss of submerged vegetation,
salinity changes or increases in suspended sediments. A number of researchers have
considered the impact of nutrient ows and toxic pollution on the sh resources of the
East Coast of the U.S. For example, Kahn & Kemp (1985) assess the economic losses
from the destruction of submerged aquatic vegetation (SAV) due to excessive nutrient
and suspended sediment loads in Chesapeake Bay. They model the impact of this
degradation on the open access striped bass commercial shery using the theoretical
framework developed by Kahn (1987), reviewed earlier.
Kahn & Kemp (1985) estimate an equilibrium catch equation and industry supply
and demand curves. To estimate the former, carrying capacity is modelled as a function
of the availability of SAV. The following relationships are used for equilibrium catch
(C e ) and carrying capacity (FC ), with these variables expressed in relative terms and the
choice of the parameter in the equilibrium catch equation reecting assumptions about
compensatory mortality:
Ce F
FC 1:36

0:85 2
F
FC
e

1:004V 0:975

19

where F is the sh stock or some index measuring its size and V is the level of SAV.
Taking these two expressions together, equilibrium catch can be expressed as a function
of SAV, similarly to the equations presented earlier relating mangrove area to shrimp
catch.
The supply curve is estimated as a log-linear function of the relative prices of
alternative target species, the cost of effort, the striped bass stock and a time trend.
Striped bass demand is modelled as a function of the price of striped bass, the prices of
substitute consumer goods, regional socio-economic variables and a time trend.

174

KNOWLER

Kahn & Kemp (1985) use the three estimated relationships to derive the welfare
losses from declining SAV. By holding all the system variables constant except the
catch, the price of striped bass and the sh stock, the three equations can be solved for
the equilibrium values of these three variables. This locus of biological, demand and
supply curves is referred to as the bioeconomic equilibrium of the system. As the level of
SAV is then varied, the change in this bioeconomic equilibrium is assessed and changes
in consumers' and producers' surpluses can be estimated. Using this procedure
(together with an allowance for sport shing losses), a marginal damage function is
derived showing the economic losses associated with varying levels of SAV.
Whereas the Chesapeake Bay study assesses the effects of nutrients on sh stocks
with submerged aquatic vegetation as the intermediary, Swallow (1994) considers
modications to estuarine salinity in the Pamlico Sound area of North Carolina and
its effects on local shrimp catches. Changes in salinity result from enhanced freshwater
ows into the estuary, which in turn arise as nearby wetlands, which normally inhibit
freshwater ows, are converted to alternative uses. A decline in estuarine salinity
reduces juvenile shrimp survival, culminating in decreased adult stocks and, by inference, falling commercial catches. Thus, the Swallow study concerns downstream effects
on habitat quality resulting from land use changes and not habitat loss per se.
Making use of a static partial equilibrium analysis, Swallow (1994) establishes the
complex linkages between changes in land use and shrimp catch by invoking a simple
causal model that again draws on the modelling approach suggested by Kahn (1987).
Concentrating on coastal-freshwater or pocosin wetlands, he develops the following set
of empirical relationships to describe the shrimp-wetland system:
pi pi ki XFBj Lbi
XFB gSAL
SAL hPOC

ws Li
20

where p is prots from shrimp harvesting, p is the shrimp price, k is a parameter


reecting exogenous impacts on shrimp stocks, XFB is an index of the shrimp stock
which proxies stock size X, L is labour measured in craft-days, j and b are parameters in
a Cobb-Douglas production function with j b 1 (constant returns to scale), w is the
marginal opportunity cost of labour, SAL is estuarine salinity in shrimp nursery areas,
POC is a proxy for the stock of undeveloped pocosin wetlands E and i is an index
representing weekly observations. As seen in the Barbier & Strand (1998) model,
production is specied as a function of the resource stock (XFB) and labour (L), so
that the value of the marginal product of the shrimp stock VMPX depends upon the
quantity of labour employed. In addition, growth in the shrimp stock is modelled
independently of stock size, and instead it is argued to depend upon environmental
factors; therefore, expressing XFB as a function of salinity seems justied.
To determine the marginal impact of wetlands conversion on shrimp catch, a series of
partial derivatives are estimated. When multiplied together, these partial derivatives
yield the value of the marginal product of pocosin wetlands with respect to shrimp

A REVIEW OF SELECTED BIOECONOMIC MODELS

175

harvesting protability, or VMPE . Using a variety of empirical procedures the required


partial derivatives are estimated for each type of wetland and subsequent land use. The
resulting annual estimates of VMPE range from US$0.28 per acre for lower quality
wetlands converted to agriculture to US$3.37 per acre for higher quality areas, again
converted to agriculture (1986 prices). These values can be interpreted as crude measures of the external costs imposed on the shrimp shery by land use changes involving
nearby wetlands.
In the nal static applied bioeconomic model examined, Loomis (1988) analyzes the
external costs of logging with respect to commercial and sport shing harvests in his
study of the Siuslaw National Forest in Oregon. Logging is postulated to affect the
downstream salmon and steelhead sheries via increases in suspended sediments, raised
temperatures, and changes in the debris content of ows. Following an approach
similar to Swallow (1994), he avoids estimating a traditional recruitment curve and
instead models the productivity of the affected shery as a function of a habitat quality
index. He incorporates a measure of carrying capacity and stock-dependent recruitment but does not model stock itself as density dependent. As with Swallow, habitat is
seen to be the principle inuence on recruitment.
Beginning with an index of Natural Habitat Quality (NHQ), Loomis (1988) constructs a natural Fish Habitat Index (FHI) which reects pristine conditions differentiated on the basis of watershed characteristics and land area. To incorporate the
effects of upstream logging, he introduces a Watershed Condition Index (WCI ), which
is a function of the various environmental disturbances described in the previous
paragraph. Multiplying the natural FHI by the WCI results in a `managed' FHI value
that is then used as the regressor in a smolt production function. Combining the smolt
production function with parameters for smolt survival, returning adults and sport and
commercial catch (by shery), the subsequent harvest of adult salmon and steelhead
can be determined as a function of the spawning habitat quality.
Increments in harvest brought about by different forest management practices are
modelled (see Table 1). For the commercial salmon shery, the impacts of different
practices are valued in gross revenue terms, since it is argued that changes in catches
would be marginal and a state of excess capacity existed in the commercial eet (see
Table 1). Although the logged area under consideration in the analysis represents only
21% of the land within the national forest, the commercial shing losses associated with
various timber harvesting options exceed US$ 500 000 over a 30 year period (average
19811983 prices). These external costs are relatively low in comparison to the timber
values involved, leading Loomis (1988) to argue that managing the forest exclusively
for sheries would not be warranted. However, a full cost-benet analysis of alternative
land uses would need to consider non-timber and other ecosystem values as well.
Applied dynamic bioeconomic models with environmental inuence
Relatively few studies have looked at environmental inuences within a dynamic
bioeconomic modelling framework. One of the pioneering attempts comes not from

176

KNOWLER

Table 1. Tradeoffs between timber harvests and sh production over 30 years, Siuslaw National Forest,
Oregon (US$ '000, 198084 prices).
Management
alternative

Timber
production
(MMCF)

Timber
area
(Acres)

Catchable
salmon
(nos.)

Catchable
steelhead
(nos.)

Commercial
salmon revenues
($ '000)

Current direction

15.52

84000

8760

3234

1147

Timber emphasis

15.16

86700

9501

2943

1130

Fish emphasis

7.88

45150

11.092

3451

1461

Minimum management

12323

3751

1693

15125

3761

1773

Natural conditions

Source: Loomis (1988).

sheries but from the terrestrial realm. Hammack & Brown (1974) estimate the nonmarket benets of waterfowl hunting using a contingent valuation study and model the
population dynamics for continental waterfowl including breeding sites (prairie ponds)
as an environmental inuence.
A more recent example from marine sheries concerns modelling of nutrient-induced
eutrophication and its impact on the commercial anchovy shery in the Black Sea
(Knowler & Barbier 2001, 2000). Increasing nutrient loads have reduced the quality of
sh habitat for many benthic species. However, it has had the reverse effect on small
pelagics like anchovy, since these species are not much affected by algal blooms and
other eutrophication-related events, and benet from increased marine system productivity. As a result, the role of nutrients as an environmental inuence is modelled as a
positive effect on anchovy recruitment. Complicating the picture was a shift in environmental conditions in the Black Sea in the mid 1980s, due to the accidental introduction of the comb-jelly Mnemiopsis leidyi. Mnemiopsis preys on anchovy juveniles,
reducing the anchovy's potential stock size and offsetting the perceived benets from
increasing nutrient loads.8 For this reason, two historical periods are modelled, a preMnemiopsis period (197186) and a subsequent period with Mnemiopsis present (1987
1993). A structural change approach is used to capture the shift between marine system
regimes.
Setting harvest h as the variable subject to management control, and formulating the
model in discrete rather than continuous time, results in the following problem under
optimal management:
max

1
X

rt fpht

CXt , St g

t0

21

subject to: Xt1 sSt R St , Pt


where rt is the discount term, dened as 1=1 t with d denoting the social discount
rate; p is the anchovy price, which is constant (no consumers' surplus); C(X, h) is the

177

A REVIEW OF SELECTED BIOECONOMIC MODELS

initial cost function with X representing the exploitable anchovy stock; s is the natural
survival rate for anchovy escaping the harvest, X h, with the latter represented as S;
Ri is the anchovy recruitment function, structurally differentiated according to whether
Mnemiopsis is present (i 2) or not (i 1); and P is the coastal phosphate concentration, the environmental inuence.
The recruitment specication was modied to accommodate the ecological complexity of the Black Sea case study (not described here), and the nal recruitment function
was estimated using multiple regression. Based upon the familiar Ricker curve (Ricker
1975), the following two recruitment expressions with phosphates as an environmental
inuence were obtained:
Pre

Mnemiopsis period: R1t Pt0:117 St e

Mnemiopsis period: R2t Pt0:117 St e

0:000614St

0:001624St

22

The cost function was derived from an estimate of the harvest function that used time
series data for anchovy stock, catch and shing effort (measured as active vessels).
Substituting anchovy escapement S for the term X h, the resulting cost function is:
CXt , St 80, 000ln Xt

ln St

23

Initially, the concentration of phosphates was set at 5.5 mM, its average value in the
northwest shelf of the Black Sea during the period. Inserting this parameter and several
others, the resulting empirical model is solved, producing a set of optimal solutions for
anchovy catch, stock, recruitment shing effort and prots for the two scenarios (preMnemiopsis and with Mnemiopsis). A second set of solution values was derived based
upon a hypothetical 50% reduction in the phosphate level (to 2.75 mM). As discussed
earlier, the correct measure of the long run welfare change induced by nutrient abatement is calculated as the difference in prots (producers' surplus) earned with and
without the change in environmental quality, since the perfectly elastic demand curve
rules out any consumers' surplus benets.
The resulting values calculated for both scenarios show that: (i) pollution control
would have actually reduced prots in the anchovy shery, and that (ii) the impact
would have been much greater during the period before Mnemiopsis entered the
Black Sea (see Table 2). With the establishment of the invader, the productivity of the
anchovy stock declines so signicantly (as do shery prots) that the effect of nutrient
abatement is relatively small.

Conclusions
This review of bioeconomic modelling incorporating environmental quality suggests
several conclusions. It is clear that both the greatest strength and weakness of
the theoretical bioeconomic framework is its scaled-down description of complex

178

KNOWLER

Table 2. Equilibrium prots in the Black Sea anchovy shery for the pre-Mnemiopsis and Mnemiopsis
periods (US$ thousands, 1989/90 prices).
Historical period

Pre-Mnemiopsis (197186)
With Mnemiopsis (198793)
Welfare Change due to Mnemiopsis

No Pollution
control

50% Reduction in
phosphates

Welfare change due


to pollution
abatement

17 080

14 336

2744

290

138

152

16 790

14 198

Source: Knowler & Barbier (2000).

phenomena. Even with this limitation, environmental quality may appear in various
forms within a bioeconomic model, either as input to commercial sheries production
or as an argument entering the utility function of consumers directly. This paper has
been concerned with the former case, and with measuring the welfare effects of a nonmarginal change in such an environmental input. It is possible to integrate an environmental inuence on the input side of the bioeconomic framework in a variety of ways,
either as habitat loss or modication, for example. But this inuence can extend to
discontinuous shifts in ecological states and related phenomena. Although many
analyses are concerned with rent maximisation under commercial or sports harvesting,
modications can be made to the basic format to accommodate other objectives and
management regimes (e.g. open access). Incorporating increasing complexity to
accommodate the realities of both real world economies and ecosystems remains an
important direction for future research.
Empirical studies that have integrated environmental inuences into bioeconomic
models were reviewed as well, and a number of lessons for future research emerge from
this review. For example, it is inevitable that much of the empirical research simplies
the ecological and economic characteristics of the systems investigated, perhaps
beyond the needs of theoretical modelling. In order to estimate the parameters of
interest numerous studies take a highly aggregated approach, do not model population
dynamics, or make a highly optimistic assumption of static bioeconomic equilibrium.
Opportunities to avoid such simplication should be explored. Applied bioeconomic
models incorporating environmental inuences also require unusually extensive data
sets, especially in the dynamic case. As a result, few applied dynamic analyses have been
undertaken. Due to data constraints, welfare changes in the empirical studies are not
always measured consistently with economic theory, and in some instances simple
changes in gross revenues are used for the purpose. Improving economic, biological
and environmental data sets should be a priority, especially in the developing country
context.
Despite these shortcomings and others cited earlier, bioeconomic modelling has
found justied support amongst many researchers. For example, Johansson (1987,
p. 160) refers to the approach as `an interesting and promising one'. Further efforts to
improve such models as a means to capture the economic implications of environmental change are warranted.

A REVIEW OF SELECTED BIOECONOMIC MODELS

179

Acknowledgements
This research was completed with the generous nancial support of the Social Sciences
and Humanities Research Council (SSHRC) of Canada, grant number 752-95-0482.
The author would also like to thank an anonymous referee.
Notes
1. Freeman (1995) provides a good review of empirical studies of recreation benets (including sport shing)
arising from improving water quality.
2. For more general reviews of the environment treated as a production factor, see Point (1994) and Maler
(1992).
3. In fact, the Schaefer harvest function is usually portrayed in continuous time and is in this sense an
expression for the instantaneous rate of harvest. In discrete time, the function must be integrated over the
full harvest season and takes on a somewhat different form. When used in discrete time, the specication
presented here is actually a restricted Cobb-Douglas production function.
4. Which of the two population parameters is affected by an environmental input is not trivial, as the two
parameters affect long run stock size and optimal harvesting effort differently (Freeman 1993).
5. The McConnell & Strand (1989) model is interpreted here as static, although they present elements of it in a
dynamic form without discounting.
6. See Conrad & Clark (1987) for a further elaboration of the dynamic sheries model using optimal control
techniques.
7. More complex specications are obviously possible, such as when the environmental input is a food item
consumed by a natural population and therefore depletable.
8. It has been speculated that the two conditions, nutrient enrichment and the success of Mnemiopsis, might
be linked, leading to more complex modelling implications. For a discussion of these, see Knowler &
Barbier (2000).

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