Joshua K. Abbott

An Embarrassment of Riches: Confronting Omitted Variable Bias and Multi-Scale Capitalization in Hedonic Price Models

Many researchers have addressed concerns of omitted variable bias in hedonic price models through the use of spatial fixed effects. We argue that this approach does not consider the biases introduced by effects that overlap the zone of capitalization for nonmarket goods. We show this bias can dominate the usual omitted variable bias using data on developer-provided open space. We control for multiscale capitalization and omitted variables simultaneously by extending the Hausman-Taylor estimator where the panel component of the estimator is defined over repeated transactions within neighborhoods rather than the traditional definition following a unique cross-sectional unit through time.

What are we protecting? Fisher behavior and the unintended consequences of spatial closures as a fishery management tool

Spatial closures like marine protected areas (MPAs) are prominent tools for ecosystem-based management in fisheries. However, the adaptive behavior of fishermen, the apex predator in the ecosystem, to MPAs may upset the balance of fishing impacts across species. While ecosystem-based management (EBM) emphasizes the protection of all species in the environment, the weakest stock often dominates management attention. We use data before and after the implementation of large spatial closures in a North Pacific trawl fishery to show how closures designed for red king crab protection spurred dramatic increases in Pacific halibut bycatch due to both direct displacement effects and indirect effects from adaptations in fishermens targeting behavior. We identify aspects of the ecological and economic context of the fishery that contributed to these surprising behaviors, noting that many multispecies fisheries are likely to share these features. Our results highlight the need either to anticipate the behavioral adaptations of fishermen across multiple species in reserve design, a form of implementation error, or to design management systems that are robust to these adaptations. Failure to do so may yield patterns of fishing effort and mortality that undermine the broader objectives of multispecies management and potentially alter ecosystems in profound ways.

Employment and remuneration effects of IFQs in the Bering Sea/Aleutian Islands crab fisheries.

Abstract This article utilizes a census of vessels before and after implementation of catch shares in the Bering Sea/Aleutian Island (BSAI) crab fisheries to examine the short-run effects of catch shares on employment and remuneration of crew. The number of individuals employed declined proportionately to the exit of vessels following implementation. Total crew hours dedicated to fishing activities remained roughly constant, while employment in redundant pre- and post-season activities declined due to the consolidation of quota on fewer vessels. We find little evidence of substantial changes in the share contracts used to compensate fishermen. Finally, we explore a wide array of remuneration measures for crew and conclude that both seasonal and daily employment remuneration increased substantially for many crew in the post-rationalization fishery, while remuneration per unit of landings declined as a result of a combination of increased crew productivity and the necessity of paying for fishing quota in the new system. JEL Classification Codes: J24, J33, Q22, Q28

Natural Capital: From Metaphor to Measurement

Current efforts to value ecosystem services have contributed little to the valuation of natural capital, suggesting that in practice “nature is capital” primarily serves as a metaphor. We provide a theoretically motivated approach for recovering natural capital prices that expands beyond idealized management to encompass current, likely inefficient, management institutions. Theoretically consistent capital valuation requires adjusting for the net marginal productivity of the natural capital asset and price appreciation. We develop a numerical approach for approximating the value of capital that integrates estimates from ecology and economics. We employ the method to recover credible accounting prices for a pound of Gulf of Mexico reef fish as a capital asset under real-world management conditions. Our approach reveals the interdisciplinarity of natural capital valuation and the importance of understanding the feedbacks between the state of natural capital stocks, human behavior affecting these stocks, and the role of institutions in shaping that feedback.

Voluntary Cooperation in the Commons? Evaluating the Sea State Program with Reduced Form and Structural Models

We utilize a variety of approaches to examine the success of a voluntary conservation program for a common property resource. The availability of panel data and a nonparticipatory group lets us use quasi-experimental methods to investigate the distribution of outcome treatment effects. We supplement these methods by incorporating a difference-in-differences structure into a behavioral model of fishing location choice to disentangle the program’s incentive effects from potentially misleading temporal variations in behavioral constraints. Our findings yield insight into the factors that support cooperation and illustrate the power of the complementary use of structural and reduced form models in program evaluation. (JEL C21, Q22)

Hidden Flexibility: Institutions, Incentives, and the Margins of Selectivity in Fishing

The degree to which selectivity in fisheries is malleable to changes in incentive structures is critical for policy design. We examine data for a multispecies trawl fishery before and after a transition from management under common-pool quotas to a fishery cooperative and note a substantial shift in postcooperative catch from bycatch and toward valuable target species. We examine the margins used to affect catch composition, finding that large- and fine-scale spatial decision making and avoidance of night-fishing were critical. We argue that the poor incentives for selectivity in many systems may obscure significant flexibility in multispecies production technologies. (JEL Q22, Q28)

Unraveling the Multiple Margins of Rent Generation from Individual Transferable Quotas

Individual transferable quotas (ITQs) induce changes along both the extensive margin—via consolidation of quota among fewer vessels—and the intensive margin, as harvesters adjust their behavior to ITQ incentives. We use ITQ introduction in the Bering Sea crab fishery to decompose the sources of rent generation across both margins. We embed an empirically calibrated structural model of the harvesting process into a sector-level model, allowing us to experimentally “unravel” the ITQ treatment. We show that the magnitude and source of rent generation under ITQs critically depends on the manner and degree of rent dissipation before ITQs are implemented. (JEL Q22, Q28)

Measuring the value of groundwater and other forms of natural capital

Significance Economists have long argued, with recent acceptance from the science and policy community, that natural resources are capital assets. Pricing of natural capital has remained elusive, with the result that its value is often ignored, and expenditures on conservation are treated as costs rather than investments. This neglect stems from a lack of a valuation framework to enable apples to apples comparisons with traditional forms of capital. We develop such an approach and demonstrate it on Kansas’ groundwater stock. Between 1996 and 2005, groundwater withdrawal reduced Kansas’ wealth approximately

Fighting Over a Red Herring: The Role of Economics in Recreational-Commercial Allocation Disputes

110 million per year. Wealth lost through groundwater depletion in Kansas is large, but in a range where offsetting investments may be feasible. Valuing natural capital is fundamental to measuring sustainability. The United Nations Environment Programme, World Bank, and other agencies have called for inclusion of the value of natural capital in sustainability metrics, such as inclusive wealth. Much has been written about the importance of natural capital, but consistent, rigorous valuation approaches compatible with the pricing of traditional forms of capital have remained elusive. We present a guiding quantitative framework enabling natural capital valuation that is fully consistent with capital theory, accounts for biophysical and economic feedbacks, and can guide interdisciplinary efforts to measure sustainability. We illustrate this framework with an application to groundwater in the Kansas High Plains Aquifer, a rapidly depleting asset supporting significant food production. We develop a 10-y time series (1996−2005) of natural capital asset prices that accounts for technological, institutional, and physical changes. Kansas lost approximately

Fisheries Production: Management Institutions, Spatial Choice, and the Quest for Policy Invariance

110 million per year (2005 US dollars) of capital value through groundwater withdrawal and changes in aquifer management during the decade spanning 1996–2005. This annual loss in wealth is approximately equal to the state’s 2005 budget surplus, and is substantially more than investments in schools over this period. Furthermore, real investment in agricultural capital also declined over this period. Although Kansas’ depletion of water wealth is substantial, it may be tractably managed through careful groundwater management and compensating investments in other natural and traditional assets. Measurement of natural capital value is required to inform management and ongoing investments in natural assets.