Adapting the Short-Run Johansen Industry Model for Common-Pool Resources: Planning the Danish Fisheries’ Industrial Capacity to Curb Overfishing

The level of capacity in a common-pool industry vis-à-vis a sustainable target level of yield simultaneously indicates the economic state of the industry, the success of its regulation, and the pressure on stocks. The main methods to assess capacity and its utilisation operate at the firm level, but neglect the industry capacity. In this contribution, the Johansen-Färe measure of plant capacity of the firm enters a multi-output and frontier-based version of the short-run Johansen industry model. This model decides on the utilisation of firm capacities such that current industry outputs are maintained while minimising the use of fixed inputs at the industry level and assuming abundant variable inputs. We also provide policy extensions relevant to combat overfishing: tightening quotas; seasonal closures; linking economic and plant capacity; decommissioning schemes and area closures; implementation issues and equity considerations; among others. The empirical results show that there is substantial overcapacity at the level of the Danish fleet, while the resulting fleet structure depends on the precise policy objective and the chosen mix of instruments.