Input Subsidies and the Depletion of Natural Capital
Input subsidies in natural resource sectors are widely believed to deplete the natural capital on which these sectors depend. However, estimating the causal effect of subsidies on resource extraction has been stymied by identification and data challenges. China’s fishing fleet is the world’s largest, and in 2016 the government changed its fuel subsidy policy for distant water vessels to one that increases with predetermined vessel characteristics. Regression discontinuity estimates imply a long-run elasticity of fishing hours with respect to fuel subsidies of 2.2. Consequently, reducing Chinese fuel subsidies by 50 percent could eliminate biological overfishing in several ocean regions. By demonstrating the substantial impact of fuel subsidies on fishing activity and fish stocks, the findings inform ongoing subsidy reform in China, other nations with subsidized fishing vessel fuel, and the World Trade Organization.
| Main Authors: | , , , , , , |
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| Format: | Working Paper biblioteca |
| Language: | English English |
| Published: |
World Bank, Washington, DC
2023-04-21
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| Subjects: | FUEL SUBSIDIES, OVERFISHING, DEPLETION OF NATURAL RESOURCES, RESOURCE EXTRACTION, SUBSIDY REFORM, IMPACT OF FUEL SUBSIDIES ON FISHING STOCK, |
| Online Access: | http://documents.worldbank.org/curated/en/099438404172325670/IDU0740c93fa09cf604a5809700080d06c0c1316 https://openknowledge.worldbank.org/handle/10986/39723 |
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| Summary: | Input subsidies in natural resource sectors are widely believed to deplete the natural capital on which these sectors depend. However, estimating the causal effect of subsidies on resource extraction has been stymied by identification and data challenges. China’s fishing fleet is the world’s largest, and in 2016 the government changed its fuel subsidy policy for distant water vessels to one that increases with predetermined vessel characteristics. Regression discontinuity estimates imply a long-run elasticity of fishing hours with respect to fuel subsidies of 2.2. Consequently, reducing Chinese fuel subsidies by 50 percent could eliminate biological overfishing in several ocean regions. By demonstrating the substantial impact of fuel subsidies on fishing activity and fish stocks, the findings inform ongoing subsidy reform in China, other nations with subsidized fishing vessel fuel, and the World Trade Organization. |
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