Fishery Subsidies: Gains or Losses?

Abstract

This paper investigates the impacts of fishery subsidies by looking at total welfare losses or gains
from the demand and supply diagram. The additional idea is to combine environmental problems
and introduce the term “externality cost” into the analysis. The kinked marginal externality cost is
a key factor helping subsidy programs to be beneficial. Two types of subsidies are considered in
this study: export and effort subsidies. However each type of subsidy has been subdivided into
three cases with different scenarios of an optimal fishing amount. The results show that if the
current level of fishing already exceeds the optimal level, fishery subsidies should not exist. But
if this is not the case, the conclusion is ambiguous depending on the rate of the subsidy and the
degrees of externality problems. At the end of this paper, I summarize the study results for all
scenarios in six models and propose a way to examine the optimal subsidy rate for further
analysis.