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MARI/CCPO Seminar Series

Competitive Markets in Stochastic Environments: Will Climate Change Drive Industry Consolidation of Global Fisheries?

Andrew Scheld, Virginia Institute of Marine Science

Climate change and continued fishing pressure threaten to increase recruitment variability for many stocks globally. Shifts in the inter-annual stability of an exploitable renewable resource may have dramatic consequences for the industries and communities which depend upon them. In this talk, the link between resource volatility and industry structure is explored using two models. First, an agent-based simulation model is presented to illustrate the effects of increasing resource variation on the number of participants in an extractive industry. Model output depicts a causal relationship between resource stability and industry structure, showing few industry participants when the resource is highly variable. Several other structural components of the model are additionally explored and suggest policy prescriptions that may mitigate environmentally driven industry effects. A second model is also presented which empirically investigates the relationship between resource volatility and industry consolidation. Here we apply tools from portfolio theory to global fisheries production and employment data, finding countries which exhibit higher portfolio volatility in production across different species groups tend to employ fewer people in their fishing industries. Both models suggest a strong link between environmental stability and the structure of resource dependent industries, indicating a need for proactive policies to address anticipated effects of climate change.