Externalities and foreign capital in aquaculture production in developing countries
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Authors
Akpalu, Wisdom
Bitew, Worku T.
Issue Date
2018
Type
Article
Language
en_US
Keywords
Ad valorem tax , aquaculture , externalities , Pigouvian tax
Alternative Title
Abstract
Most developing countries are increasingly depending on freshwater based aquaculture to supplement the declining catch from capture fisheries. Yet the competition between capture fisheries and cage culture for space, pollution generated by cage culture, and fish markets interaction effects are hardly conceptualized in a bioeconomic framework. Furthermore, the economic viability of cage culture depends on substantial investment thresholds, engendering foreign direct investment in the industry in developing countries. This paper develops a conceptual model for fresh-water-based aquaculture that accounts for these effects. We found that a Pigouvian tax (optimum ad valorem tax) that corrects the externalities depends on economic and biological parameters in both fisheries. Correcting for the externalities results in a reduction in aquaculture production but not optimum wild catch. Furthermore, with foreign capital in aquaculture, the Pigouvian tax equals the ratio of net to total benefit from aquaculture. Numerical values are used to illustrate the results.
Description
© Cambridge University Press 2018. This is an Open Access article, distributed under the terms of the Creative Commons
Attribution-NonCommercial-ShareAlike licence (http://creativecommons.org/licenses/by-nc-sa/4.0/), which permits
non-commercial re-use, distribution, and reproduction in any medium, provided the same Creative Commons licence
is included and the original work is properly cited. The written permission of Cambridge University Press must be obtained
for commercial re-use.
Citation
Publisher
Environment and Development Economics