Estimation of small scale fishery production relationships : the case of the Florida reef fishery

Abstract

This study develops an improved method for understanding economic production relationships in small scale fisheries. This method postulates that gross revenue is a function of physical input quantities, and is based upon the transcendental logarithmic function to derive factor share equations for each of the five inputs in the model. The translog form was selected because of its flexibility, non-constant elasticity of substitution, and input interaction to give a more realistic representation of production relationships in small scale fisheries. The model was tested using cross-sectional data from a cost and earning survey on the Florida reef fishery. The joint generalized least squares procedure for seemingly uncorrelated equations was used for the parameters estimation. A total of 68 observations were used. The estimation results were not very encouraging because of the poor response of the model. This may in part be attributable to inconsistencies shown by the data. The translog gross revenue function, was also estimated. The result showed good response. However, the model was characterized by multicollinearity and sensitivity of parameters to variable substitution. Similar results and characteristics were obtained when the Cobb- Douglas function was estimated. These results were also influenced by the size and the characteristics of the data set. The method presented here for estimating economic production relationships in small scale fisheries is attractive because (1) factor share and output elasticities are a function of the inputs and (2) it allows varying the inputs in bundles instead of individually, which is more realistic for policy analysis. Further testing of this model is encouraged using a larger and more accurate data set.