Input Subsidies and the Destruction of Natural Capital: Chinese Distant Water Fishing

Gabriel Englander, Jihua Zhang, Juan Carlos Villaseñor-Derbez, Qutu Jiang, Mingzhao Hu, Olivier Deschenes and Christopher Costello

No 31008, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Input subsidies in natural resource sectors are widely believed to cause depletion of the natural capital on which those sectors rely. But identification and data challenges have stymied attempts to empirically estimate the causal effect of subsidies on resource extraction. 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. The policy features 25 thresholds at which subsidies discontinuously increase. Using a regression discontinuity design, we estimate that a 1% increase in fuel subsidy increases hours of fishing by 2.2%. Reducing Chinese distant water fuel subsidies by 50% could eliminate biological overfishing in several ocean regions.

JEL-codes: H23 O13 Q22 Q28 (search for similar items in EconPapers)
Date: 2023-03
New Economics Papers: this item is included in nep-agr, nep-cna and nep-env
Note: EEE
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