Catch, efficiency and management: A stochastic production frontier analysis of the Australian Northern Prawn Fishery

Abstract

This paper is a study of the production technology and relative efficiency of vessels harvesting banana and tiger prawns in the Northern Prawn Fishery (NPF), one of Australia’s largest and most lucrative fishing areas. It is based on an unbalanaced panel data set of 226 observations among thirty-seven vessels for the years 1990-1996 and employs a technique which specifies a stochastic frontier production function in order to decompose the variation among vessels in the harvest of prawns due to unbounded random effects beyond firm control from those that result in differences in technical inefficiency among fishing vessels in the industry. In other words, variations in maximum expected output can occure either as a result of stochastic effects (e.g., good and bad weather states), or from the fact that vessels in the industry may be operating at various levels of inefficiency due to mismanagement, poor incentive structures, less than perfectly competitive behaviour or inappropriate input levels or combinations. Estimation of this output frontier also provides key information on the relative importance of inputs in the production of banana and tiger prawns, output elasticities, returns to scale, possible variations in stock size and the economic performance of each fishing vessel, year to year...