by
J.M. Gates
Department of Resource Economics
University of Rhode Islands
USA
INTRODUCTION
Proposals to levy fees in natural resource industries have a long and controversial history. Fishing industries are relative newcomers to the arena. Foreign access fees are even newer; it has been less than a decade since the concept became a plausible policy option. Despite three decades of well reasoned, and occasionally eloquent presentations, changes in fishing fees have varied from imperceptible to glacial. Despite this inertia, economists have cheerfully maintained an optimistic, although not unanimous stance; perhaps because Lord Darlington's criterion for cynicism is very nearly the inverse of what economics is about 1/. Economics is, in large part, the study of wealth or value creation and the general determinants of prices. Few economists are noted for their knowledge of the price of anything in particular. A policy toward foreign fees for fishing access poses interesting case issues for economic study in part because it requires that a price be imputed where none exists. Setting fees may also be regarded as an element in a "game". This game may be a zero sum game in which gains to winners equal losses of losers. It may also be a negative sum game in which players, figuratively speaking, cut off their noses to spite their faces. More productively, it may also be a positive sum game; one in which gains exceed losses resulting in a gain in real economic value or wealth. In the course of developing the topic, I propose to consider the following three facets of the valuation problem:
(1) Objectives of fees
(2) Producer Surplus and Potential Fees
(3) Measurement Methods and Problems1/ Cecil Graham: "What is a cynic?"Lord Darlington: "A man who knows the price of everything and the value of nothing".
Oscar Wilde: Lady Windemere's Fan, Act III.
OBJECTIVES OF FEES
In setting fees, it is, in practice, not possible to separate objectives, or ends, from the means available to achieve them. However, a simultaneous discussion of objectives and means would be quite unreadable. Hence, if only for expository purposes, we will discuss objectives separately. A brief statement of each is useful to provide a terminology and framework for discussions. Among the objectives to be considered are (1) net national benefits, (2) treasury revenues, (3) regional employment, (4) fisheries management and (5) foreign policy goals. These goals are not mutually exclusive; one would not be surprised to find mixtures of objectives being pursued. As in any game, there exist conflicts about objectives. Foreign fleets may exploit a stock in common with domestic fleets. The common stock may be a target species or a "by catch" species. Allocations to foreign fleets may increase treasury revenue but decrease domestic producer and/or consumer surplus. The net national benefits objective would take a trade-off using equal weights. Domestic fishermen would perhaps prefer to see a much larger weight placed on domestic producer surplus. A national with pressing public finance needs for development may prefer to give higher weight to revenue to the national treasury.
A. Net National Benefits
The word "benefit" is used by economists in ways that are narrower and more specific than in everyday usage. Under a sufficiently vague use of the word, all five of our stated objectives could simply be rolled into an indefinable mixture and the outcome labelled "net national benefits". This is linguistic imperialism; the entire subject matter is appropriated in a semanticism which obscures linguistic imperialism; the entire subject matter is appropriated in a semanticism which obscures other than enlightens. For our purposes, net national benefits is a purely monetary measure. In general, its components include benefits to producers, consumers and the national treasury. Benefits to producers and consumers are measured by "producer surplus" and "consumer surplus", respectively. We shall have more to say in due course about these measures 2/, They are introduced here only to permit us to make a central point about the net national benefits objective. Various policy decisions concerning foreign access and fees may increase benefits to one group at the expense of another. That is, policy decisions affect the incidence or distribution of benefits as well as their aggregate magnitude. Thus, reallocation of fish to foreign fishermen may permit an increase in treasury revenue but may also cause a decrease in benefits to domestic producers (fishermen). Whether one decides in favour of such a reallocation depends, in part, on the relative weights one attaches to the components. If each receives equal weight then the reallocation would be favoured if the treasury gain exceeds losses to domestic producers. Economists usually assume that the components of net national benefits "should" receive equal weight 3/. Under this egalitarian assumption, policies which increase total net national benefits are positive sum in that the size of the national economic pie has been increased. Such policies are often referred to by economists as "efficient".
2/ See subsequent discussion or, for now, read "benefits to producers" and "benefits to consumers' surpluses".3/ Adding components to obtain total net benefits is an intuitive common sense, routine operation. It is easy to overlook the fact that it assumes an egalitarian value structure, that is, all potential beneficiaries are to be regarded as equally deserving of benefits.
Fees charged foreign fleets in return for fisheries access have no effect per se on domestic producer surplus or domestic consumer surplus. Such fees do increase revenues and national benefits compared to a status quo which allocations are made without charge. Consider, conversely, the imposition of a tax on domestic fishermen in a fishery which has already resolved the open access problem via individual catch rights. In such a case, the tax is a zero sum transfer to the treasury, and has no effect per se on net national benefits. If the fishery question had not resolved the open access problem, a tax is an alternative way of so doing and the fishery is, potentially, a positive sum game.
B. Revenue to the National Treasury
Fees charged foreign fleets in return for access to fisheries are attractive revenue raising devices for several reasons. From a global perspective, aggregate quota allocations by country are likely to be associated with the standard overcapitalization problem of too many vessels chasing too few fish. Fees, if set high enough, would discourage such overcapitalization. In so doing, fees would convert a zero or negative sum fisheries game into a positive sum game. Since the gains would be incident on the host nation this would also represent a gain net national benefits to the host country.
If the treasury revenue is important, then it behooves policy makers to determine how sensitive foreign demand for allocations if to fee levels or to establish a mechanism which would emulate a competitive market. In such a mechanism, participants would have an incentive to reveal their demand price for allocations.
C. Regional Employment
It is not uncommon to find fishing communities in which living standards are low and employment prospects bleak. Geographic isolation of fishing communities, and a labor force whose skills are not in high demand elsewhere in the national economy, may limit interregional emigration of labour as a solution to such regional economic disparities. Mobility is further restricted if there exist barriers to entry in alternative labour markets. Such barriers include geography, minimum wage, guild type restrictions, ethnic or regional animosities etc. For a variety of reasons, nations may prefer to look to local natural resource industries, including fisheries, to alleviate regional employment problems. When this take the form of vessel subsidy programmes, new fishermen may be helped to the detriment of existing fishermen and the taxpayer. Such subsidies are negative sum transfer payments under the economic efficiency or national benefits objective. Foreign fees, construed broadly, can be part of alternative policies for regional employment.
If we assume that foreign fleets are distant water fleets with on-board processing capability and motivated by profit it is of interest to consider their reactions to access fees. The fish they desire can be caught by their own vessels or by those of the host country via "over the side " sales and/or "joint ventures". If domestic fishermen pay lower fees (zero fees included) then domestic catcher vessels have a competitive advantage, other things being equal, over foreign catches vessels. Of course, other things are rarely equal; domestic vessels may suffer from disadvantages. Nevertheless, as the foreign domestic fee differential is increased it may reach a level at which it offsets any other competitive disadvantages which the domestic vessels may have. At this fee differential or higher, foreign processing vessels have an incentive to procure their fish via domestic catcher vessels; thereby stimulating local or regional employment. Alternatively, fees may reach a level at which the producer surplus of foreign vessels is exhausted so that their demand for allocations effectively drops to zero. Analogous reasoning suggests that a fee structure which penalizes processing vessels might, in the long run, stimulate foreign investment in domestic processing infrastructure. This development of domestic processing capability could contribute to regional employment via onshore employment in processing and also via more domestic catch vessels. Note that this stimulus toward regional employment exists without necessarily diverting treasury revenues into subsidies for the domestic fishing industry. Such a diversion would be an additional stimulant but, as noted earlier, it would be a negative sum transfer payment. Under the net national benefits objective one would compare the total benefits - treasury revenues from fees and domestic producer surplus and select the policy which yielded the greatest total benefits. If potential treasury revenues exceeded the potential benefits associated with domestic fisheries development, then under the net national benefits objective one would choose to forego regional employment increases associated with fisheries development. Conversely, if fisheries development is chosen despite conflicts with the net national benefits objective, the choice would reveal that some benefits are more equal than others. By posing the trade-off in this manner it is possible to rationally evaluate the cost of regional employment increases in terms of treasury revenues foregone. If it costs, let us say, $1,000 in annual treasury revenue foregone per job created, one may favour the employment objective. Conversely, if it costs, let us say, $50,000 annually per job created, then policy makers may regard this as a steep price to pay given other demands on treasury revenues.
D. Fisheries Management
It has been suggested by various scholars, and, less frequently, by industry representatives, that selective taxes be used to channel fishing effort away from overfished species toward less heavily utilized species. The rationale of this suggestion applies equally well whether the fishing is done by domestic or foreign fleets. It is frequently the case that foreign fleets will catch many species of fish besides the target species. The non-target or "by-catch" ratios are usually subject to some influence via gear selectivity and fishing strategy. They are also, for a given vessel, subject to great variability. The host country may place restrictions on by catches for species which it wishes to reserve for itself. Such restrictions may be knife edged", such as vessel quotas. Alternatively, it could levy by-catch fees. The problem with "knife edged" mechanisms such as by catch quotas is that, a given vessel may have too much by-catch due to random variations in catch rates. If survival rates of discarded fish are low, it makes little sense, economically or biologically, to require that the excess be discarded. What is needed, instead, is a more delicate mechanism; one that removes the economic incentive to catch the by-catch species and yet leaves a small incentive to keep catches which are excessive due to random events. Fees could provide such a mechanism in at least some cases. In point of fact, the quota system for managing by-catches is a somewhat bizarre form of what is proposed. The violator of quotas pays a fee which is termed a "fine" or a "penalty". The principal differences are (1) semantic and (2) the level of fees-whether intended to be punitive or merely sufficient to provide the desired incentive. A more flexible schedule might charge a modest fee for by-catches within, let us say, 0.5 standard deviations of the mean. For catch rates which deviate by more than this, fees might progressively increase in step fashion up to a level where further increases would cause skipper to discard fish rather than pay fees.
E. Foreign Policy
It is not easy to negotiate without something to exchange. Thus, any resource, including fisheries allocations is likely to be regarded by foreign affairs staff as part of their stock of negotiating capital. This negotiating capital has more purchasing power if fees are low than if fees are high. This may mean that fees per se may not be used. Instead, allocation (or refusal to do so) of fish to foreign fleets may be a component in a larger set of negotiation issues. This foreign policy linkage makes life difficult for scholars trying to unscramble the omelet but the linkage may be inevitable. Even though the allocations be imbedded in a larger set of foreign policy issues, it is still desirable that negotiators have a good idea of the value of the allocations being decided so that informed decisions can be reached.
III. PRODUCER SURPLUS AND POTENTIAL FEES
The potential fees which can be levied for fishing access are derived from the concept of "producer surplus" or "economic rent". These are equivalent terms but I prefer the former because of similarity with the analogous concept for benefits to consumers; viz. "consumer surplus". In both concepts we recognize that resource users or buyers of commodities value the use or the purchase at least as much as they had to pay to exploit the resource or buy the commodity. This recognition derives from the simple behavioral axiom of voluntary exchanges. The axiom is that under conditions of voluntary exchange, people do not expend more (usually less) for an access privilege or purchase of goods and services than said privileges or commodities are worth to them.
The general definition of producer surplus is the difference between total revenue and the opportunity cost of all inputs used to generate that revenue. In fisheries, certain complications must be recognized. I propose to do this sequentially; that is, by considering a sequence of examples beginning with the simplest (and least realistic) case initially. To make the discussion more concrete, Table 1 has been prepared which illustrates typical cost and earnings results for an hypothetical fishing vessel. The particular cost items and their magnitudes would differ between applications but this Table will suffice as an example to illustrate the principles we are following.
A. Case 1: The Simplest Case
The first case is the simplest in which all paid factors of production receive their opportunity cost 4/. In this case, recorded costs equal opportunity cost. A cash payment of $22,000 to the skipper/owner as compensation for the opportunity cost of his capital investment is such an example. Under these assumptions, producer surplus is the same as profits which are -$9,000. This measure of profits does not correspond to common accounting procedures. Instead it is an economic concept of profit - the residual return to risk bearing after all cost of production have been substracted.
4/ The concept of opportunity cost is discussed below when it is used to adjust numbers in Table 1.
Before proceeding to more complex cases it is noteworthy that this negative profit margin is misleading as we will see in due course. This result also illustrates a problem to which we shall return viz., that producer surplus is, in part, dependent upon the catch per unit effort and hence upon the total amount of effort granted access. In considering granting access to "one" additional vessel we should at least measure the tradeoff between the additional fee revenue which the entrant would yield and the fact that his entry will reduce (by a very small amount) the producer surplus of all existing vessels. When added across the whole fleet the net result could actually be a reduction in potential fee revenue. Let us pursue this possibility via an example.
B. The Effect of Fishing Effort on Fee Potentials in the Simplest Case
The illustrate the sensitivity of fees to fishing effort, let us assume a virtual population model in which total fishing effort and hence fishing mortality are reduced from 1.1 to 1.0. This would produce a 5.2 percent decrease in catch and a 3.4 percent increase in catch per unit effort. With an aggregate demand price flexibility of, let us say 0.5, gross revenue per vessel-year would increase by 6.1 percent. For our representative vessel, this change would have significant repercussions. Gross stock would increase from its current level of $329 thousand (Table 1) to a new level of $349 thousand per vessel-year. Gross crew share would increase; the details depending on the lay system.
A typical "broken" lay system involves deduction of trip expenses from gross stock. The residual is then split between crew and vessel. Typically, trip expenses include fuel, food and ice. However, the details of what trip expenses are shared vary between vessels. Moreover, some vessels operate on a "clear" lay - trip expenses are not deducted before calculation of shares. For illustrative purposes we assume a broken 41 lay.
Under this assumption, trip expenses of $70 thousand are deducted from the new gross stock of $349 thousand to obtain $279 thousand per vessel-year available for share distribution. Gross crew share would increase by 7.8 percent from $153 thousand to $165 thousand. New crew share would increase from $132 thousand to $144 thousand. The net crew share per man would increase to $29 thousand; an increase of 12 percent. Assuming a constant bonus results in a total crew share per man-year of $30 thousand.
The gross boat share would also increase by 7.5 percent to $114 thousand per vessel year. The net boat share would increase by 62 percent to $21 thousand per vessel-year.
The captain's share as a crew member would increase to $29 thousand. Assuming no change in bonus, the total captain's share would increase by 5.3 percent to $40 thousand.
In terms of financial performance indicators, the return to capital increases by 62 percent to a new level of $21 thousand per vessel year. This represents a 6 percent average return on investment versus the old level of 4 percent. The owners total factor income increases by 20 percent to a new level of $61 thousand per vessel-year. The owners return to labour and management increases by 34 percent to $39 thousand per vessel-year. Profits increase form -$9 thousand to +$1 thousand per vessel-year. Thus, a seemingly "small" reduction of about 10 percent in total fishing effort has caused a substantial improvement in profits. This is only the beginning of the story, fortunately since we still do not appear to have much of a fee potential. To progress further however, we must disgress into the concept of "opportunity cost".
C. Opportunity Costs and Their Implications for Potential Fees
Whenever an individual chooses to do something, he chooses not to exploit one or more other mutually exclusive opportunities. The economic gain associated with the (best) opportunity not exploited is an "opportunity" cost. It is part of the real cost of the alternative chosen. This concept appears in economics under many guises. For example, if a crewman can earn $20 000 in on-shore employment then this is his opportunity cost of fishing. Unless the net crew share per crewman is at least as great as this, a crewman is paying a monetary cost in exchange for an item of consumption enjoyment - the satisfaction or job preference associate with fishing. If the net crew share exceeds opportunity cost the excess is a combination of a factor rent and a premium for absorbing greater income variance in fishing. Here, the idea is that payments in excess of that required to obtain the supply of a factor of production (in this case, labor) represent a form of "surplus" payment. It is termed a factor rent. Note that, job and risk preferences aside, factor rents will equal the difference between opportunity costs and factor payments. Thus, for our simplest case in which we assumed that all inputs were paid their opportunity costs, factor rents were, by assumption, zero and producer's surplus reduced to profits. Next we need to relax this assumption.
Suppose that the annual opportunity costs of a crew and captain are $ 20 and $ 30 thousand per man-year, respectively. Then each crewman in our simplest case is receiving an annual factor rent of $27-$20 = $7 thousand. The captain receives an annual factor rent of $38 - $30 = $8 thousand. Thus, instead of a residual return over the opportunity cost of capital, our producer surplus consists of the sum of factor rents accruing to capital (i.e., profit), labour (crew) and management (captain). Table 2 illustrates application of these concepts to our representative vessel for status quo effort levels and for a 10 percent reduction in effort.
Note how crucial it is not to confuse accounting "profits" of the vessel with the economic concept of producer surplus or total factor rent. Obviously, if our hypothetical vessel were charged fees of $27 thousand, it would not be possible for the owner to pay such fees with the status quo remuneration system. The remuneration system would have to be renegotiated. This would suggest that fee increases should be phased in gradually to allow time for internal renegotiation of terms.
Note, also how sensitive producer's surplus is to the total amount of fishing effort. This is a crucial point, for, if past history is any guide, failure to recognize this will result in fee potentials being driven to negligible levels. By negligible levels we mean levels that are so close to zero that the revenue potential does not justify the information and enforcement costs required to attain such precision in data 5/.
5/ As fee potentials approach zero, knowledge of their magnitude becomes economically unaffordable.
It is also worth noting that by introducing opportunity cost and total factor rent, we have finessed the need to have very precise details on lay systems. Instead, what is needed are opportunity costs of crews and captain. Since lay systems exhibit a large number of permutations, this is an important simplification which enables us to revert to more readily available labor statistics and to readily applied procedures of budgeting.
D. Multilevel Planning Aspects
It is often convenient and useful in economics to use the concept of a "central decision maker." in so doing it behooves us to keep in mind that in political economy there is no such entity; it is a deliberate analytical abstraction. The simplest manifestation of this appeared in discussing potential fees vs. remuneration systems. Clearly, a host nation does not "control" remuneration systems on sovereign foreign vessels. This is a very simple case however and it was implied that one can rely on the reactions of participants to renegotiate the terms of the remuneration system. It was also suggested that such renegotiations may take some time for participants to work out.
A more important illustration arises in connection with mobile distant water fleets. Such fleets will, presumably, compare the residual producer surplus (net of fees) available in alternative fishing areas-of the world. This residual must be left positive as an inducement to renegotiate lay systems internally. A host nation which tries to extract the total producer surplus may find such fleets reacting in a rational way by going elsewhere. This can be a complication which simplifies the information problem. Under such circumstances, fine detail about the economics of vessels may be largely irrelevant; a comparison of gross stock obtainable in other host countries may be all that a host nation need to derive approximate estimates of rational fees (Meuriot & Gates, 1982). Note that opportunity cost has crept in here in another guise. In this instance, the relevant (opportunity) cost of fishing in one host fishery is the potential earnings foregone in another.
Fees may also be used to influence fishing strategy and alter species composition. To achieve these ends, fees must be levied, at least in part, on a poundage basis and must be accompanied by an on-board inspection programme. Alternatively, fees might be charged on a vessel-day or vessel-month basis with or without by-catch restrictions. With no by-catch restrictions, potential fees are higher and enforcement costs lower since a statistical monitoring programme is all that is needed to determine catch composition.
Fees may also be used to encourage on-shore development of processing facilities. Fees levied on catches or catcher vessels encourage the substitution of domestic (fee exempt) catcher vessels. If fees were levied on processing vessels they might also encourage substitution of on-shore domestic processing plants for processing at sea.
IV. ESTIMATION OF POTENTIAL FEES
In general, three classes of methods exist for estimating potential fees. The first of these is an auction which is also a method for implementing or collecting fees. In a situation where there is a large number of potential buyers and no collusion among buyers, an auction is an ideal system in that the desired end may be attained at low cost. Certain difficulties may arise however. Where the number of bidding agents is small or the market structure facilitates collusion, the bid price may be far less than the potential value. Consequently, even if an auction is used it may prove desirable to administratively value foreign allocations as an independent check on market performance. Where multiple objectives (for examples diplomacy, regional development, fisheries management) intrude it may be difficult to couple a market auction with a pricing policy consonant with these objectives.
If an auction is not used, administrative valuation procedures may be applied. These procedures include statistical and synthetic methods. Under appropriate circumstances, statistical methods (in particular, multivariate regression methods) enable one to infer willingness to pay from past observations on fees and participation rates. The techniques have proven useful in numerous economic applications from estimating cost functions to estimating willingness to pay of recreational fishermen. The sine qua non of statistical methods is the existence of a data set; either cross-sectional on time series or both. Thus, it is probable that the usefulness of these methods will increase with the passage of time as data is accumulated on foreign fee transactions. However, the fact that many extraneous factors may enter the negotiations over terms means that unscrambling observations ex post may prove a difficult exercise in econometrics.
A variant of this approach is exemplified in a recent study by Crutchfield (1983). This study measured benefits to consumers (consumer surplus variations) and, in so doing, finessed some of the complexities just discussed. A premise of the approach is that the government of the recipient nation is motivated by consumer welfare and would take actions including fleet subsidies, if necessary, to preserve consumer welfare. However, the ubiquity of trade barriers suggests that consumers receive less weight than industry. Furthermore, the willingness of governments to subsidize fleets need bear no relationship to net national benefits whether they be comprised of consumer or producer surpluses. This willingness of governments to engage in negative sum games implies that potential fees could even exceed the rational measures we have been describing; i.e., net national benefits.
Synthetic methods include such informal methods as budgeting or the "economic engineering" approach. This method is exemplified by our Table 1. A more formal extension of these methods is mathematical programming. An example of the application of these methods to the problem at hand may be found in Meuriot and Gates (1982). In these extensions it is possible to explicitly model the reactions of fishing fleets to fees, by catch quotas, etc.
The principal advantages of synthetic methods are that such methods are "forward looking" and allow the analyst to include all the information at his disposal. The ability to include information of varying degrees of certainty cuts both ways. When subjective information is included results are consistent with subjective knowledge. However, the extent to which such results mirror the objectives world depends on how good the information was.
These methods also presume that fishing fleets are motivated by the measure of economic gain outlined earlier, viz., producer surplus. While this assumption is perhaps never exactly true it is a very useful first approximation which is used widely in economics.
We have reviewed auctions, and administrative methods of valuation for foreign fees. No suggestion has been made that any method is universally superior. Rather, the advantages and disadvantages of each were indicated. In the final analysis, fees will inevitably require informed judgement and analysis of the reactions of fleets. Precise measurement of willingness to pay is not a free good; trade-offs will be needed between the gains versus the costs of attaining greater precision.
REFERENCES
Crutchfield, S.R., 1983. Estimation of foreign willingness to pay for United States fishery resources: Japanese demand for Alaska Pollock. Land Economics, 59(1):16-23
Meuriot, E. and J.M. Gates, 1982. An economic evaluation of foreign fishing allocations. University of Rhode Island, Kingston. Mar.Tech.Rep., (84)
Stokes, R.L., 1981. The new approach to foreign fishing allocations: An economic appraisal. Land 1981 Economics, 57(4):568-82
Table 1 - Cost, revenue and financial performance information for a representative vessel
|
|
Mean value ($1,000/year) |
|
|
|
1. Gross revenue (Stock) |
329 |
|
|
|
2. Operating costs: |
|
|
|
|
|
Fuel |
53 |
|
|
Food |
9 |
|
|
|
Ice |
8 |
|
|
|
Repair and maintenance |
17 |
|
|
|
Insurance |
14 |
|
|
|
Payroll taxes |
6 |
|
|
|
Welfare and pension |
7 |
|
|
|
Lumping (labour costs for off-loading fish) |
4 |
|
|
|
Wharfage |
0.5 |
|
|
|
Gear and supplies |
18 |
|
|
|
Licences |
0.7 |
|
|
|
Truck |
1 |
|
|
|
Office |
0.3 |
|
|
|
Clerical and Legal |
1 |
|
|
|
Travel |
1 |
|
|
|
Sub-Total: |
141 |
|
|
|
3. Shares: |
|
|
|
|
a. Crew: |
|
|
|
|
|
Gross crew share |
153 |
|
|
Net crew share 1/ |
132 |
|
|
|
Net per man |
26 |
|
|
|
Crew bonus |
1 |
|
|
|
Total per man |
27 |
|
|
|
b. Boat Shares: |
|
|
|
|
|
Gross boat share |
106 |
|
|
Boat operating expenses |
77 |
|
|
|
Vessel quasi-rent 2/ |
29 |
|
|
|
Depreciation |
16 |
|
|
|
Net boat share |
13 |
|
|
|
c. Captain: |
|
|
|
|
|
Captain's crew share |
26 |
|
|
Captain's bonus |
11 |
|
|
|
Total |
38 |
|
|
|
4. Capital stock |
364 |
|
|
|
5. Financial performance indicators: |
|
|
|
|
|
Opportunity cost of capital |
22 |
6% |
|
Return to capital 3/ |
13 |
|
|
|
Owner's return to labour and management 5/ |
29 |
|
|
|
Owner's opportunity cost |
38 |
|
|
|
Owner's total factor income 4/ |
51 |
|
|
|
Profit 6/ Total |
-9 |
|
|
|
Percent |
|
2% |
|
Notes:
1/ Net crew share = gross crew share minus fraction of trip expenses (fuel, food, ice) paid2/ Vessel quasi rent = amount left for interest and depreciation
3/ Return to capital = net boat share
4/ Owner's total factor income measures nets returns to capital, labour and management factors involved in vessel operation. It is the sum of boat share and the captain's share. Its meaning is obvious for owner-operated vessels. For vessels with self-financed absentee owners, this measure includes payments accruing to different people. For owners who are partially or wholly financed by non-equity capital, a portion of this measure is paid as interest to the financial sources.
5/ Owner's total factor income minus opportunity cost of capital
6/ Profit = owner's return to labour and management minus owner's opportunity cost
Table 2
|
|
Status quo annual rent |
With 10% effort reduction |
|
(in thousands/vessel-year) |
||
|
Capital |
-9 |
1 |
|
Labour |
28 |
36 |
|
Management |
8 |
10 |
|
Total rent = Producer's surplus |
27 |
47 |
