Income diversification and risk for fishermen

Abstract

Catches and prices from many fisheries exhibit high interannual variability, leading to variability in the income derived by fishery participants. The economic risk posed by this may be mitigated in some cases if individuals participate in several different fisheries, particularly if revenues from those fisheries are uncorrelated or vary asynchronously. We construct indices of gross income diversification from fisheries at the level of individual vessels and find that the income of the current fleet of vessels on the US West Coast and in Alaska is less diverse than at any point in the past 30 y. We also find a dome-shaped relationship between the variability of individuals' income and income diversification, which implies that a small amount of diversification does not reduce income risk but that higher levels of diversification can substantially reduce the variability of income from fishing. Moving from a single fishery strategy to a 50-25-25 split in revenues reduces the expected coefficient of variation of gross revenues between 24% and 65% for the vessels included in this study. The increasing access restrictions in many marine fisheries through license reductions and moratoriums have the potential to limit fishermen's ability to diversify their income risk across multiple fisheries. Catch share programs often result in consolidation initially and may reduce diversification. However, catch share programs also make it feasible for fishermen to build a portfolio of harvest privileges and potentially reduce their income risk. Therefore, catch share programs create both threats and opportunities for fishermen wishing to maintain diversified fishing strategies.F ishing is a risky business. Not only do fishermen face the highest rate of work-related fatalities of any US industry, with a fatality rate more than 30 times higher than average (1), they face high financial risk as a result of high year-to-year variation in their income (2). In this article we focus on the latter form of risk. High annual variation in income is a problem that is common to a variety of occupations dependent on natural resources, and there has been extensive study of income risk-coping mechanisms, particularly for farmers in developing countries (3-10). Riskreduction strategies used in agriculture might also be effective in fisheries. Crop diversification is a common means of reducing risk in agriculture, taking advantage of asynchronous variation in yield-response and prices to minimize idiosyncratic risk (11-13). Another common strategy in agriculture, particularly in semiarid regions with high fine-scale variation in rainfall, is to farm a number of geographically separated plots to ensure some will be in areas with sufficient rainfall (6). McCloskey (14) argues that risk reduction was the motivation of English farmers for "scattering each man's holdings in dozens of small strips" which, although inefficient, was widely practiced. Farmers can also plant a combination of crops adapted to wet or dry conditions to mitigate the risk assoc...

Risk versus economic performance in a mixed fishery

“…In other cases, differences between observed harvesting levels of individual species and the levels which would ensure MEY may be related to the fact that commercial fishers operate across a range of species, with varying ability to target these species separately, leading to difficulties in identifying optimal fishery-wide levels of fishing capacity and allocation of fishing effort. Moreover, revenues from fisheries may vary greatly from year to year owing to natural variation in fish stocks (Kasperski and Holland, 2013) that cannot be predicted with any reliability, leading to varying levels of economic risks for fishing operators (Sethi, 2010). While maximising economic yield is usually seen as a desirable objective for fisheries management, industry stakeholders usually also value stability over time.…”

Can income diversification resolve social-ecological traps in small-scale fisheries and aquaculture in the global south? A case study of response diversity in the Tam Giang lagoon, central Vietnam

“…Income diversification is often proposed in this context as a way to improve household economies and decrease the direct dependence on natural resources (Allison and Ellis 2001, Ellis andAllison 2004). Especially within fisheries, the diversification and combination of target species, gear, and fishing grounds are often considered as salient strategies for poverty reduction (Olale and Henson 2013), climate change adaptation (Coulthard 2008), and risk mitigation (Kasperski andHolland 2013, Finkbeiner 2015). Although diversification can doubtless serve such purposes, our case study of livelihood change in the Tam Giang lagoon calls for closer attention, especially to aspects of disparity and balance related to income diversification.…”

“…The conventional understanding of livelihood diversification emphasizes the importance of income diversification, as, e.g., in Ellis's (2000:15) definition: "livelihood diversification is defined as the process by which rural households construct an increasingly diverse portfolio of activities and assets." As can be seen in the two subsequent examples, this definition is adapted in much of the literature on diversification in fisheries (e.g., Coulthard 2008, Kasperski and Holland 2013, Olale and Henson 2013, Finkbeiner 2015 (Kaperski and Holland 2013:2077-2078 It is clear that the responses described, i.e., fishers using various new gear or fishers shifting to aquaculture, count as examples of income diversification according to its conventional understanding and definition. Subsequently, we will describe how this type of income diversification impacted people's well-being and the resilience of lagoon resources and ecologies.…”

Global connectivity and cross-scale interactions create uncertainty for Blue Growth of Arctic fisheries

“…At the same time there is also considerable variation to what extent individual vessels or companies diversify in terms of their catch portfolio. The tradeoff for this diversification is that a more specialized vessel (or company) generally can operate more efficiently, generating higher returns on average, but they are also exposed to substantially higher risk and vulnerability to ecosystem and economic change [84]. The Box 2 illustrates further the close connectedness between economic and ecological systems in fisheries.…”