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Externalities and foreign capital in aquaculture production in developing countries

  • Wisdom Akpalu (a1) and Worku T. Bitew (a2)
Abstract

Most developing countries are increasingly depending on freshwater based aquaculture to supplement the declining catch from capture fisheries. Yet the competition between capture fisheries and cage culture for space, pollution generated by cage culture, and fish markets interaction effects are hardly conceptualized in a bioeconomic framework. Furthermore, the economic viability of cage culture depends on substantial investment thresholds, engendering foreign direct investment in the industry in developing countries. This paper develops a conceptual model for fresh-water-based aquaculture that accounts for these effects. We found that a Pigouvian tax (optimum ad valorem tax) that corrects the externalities depends on economic and biological parameters in both fisheries. Correcting for the externalities results in a reduction in aquaculture production but not optimum wild catch. Furthermore, with foreign capital in aquaculture, the Pigouvian tax equals the ratio of net to total benefit from aquaculture. Numerical values are used to illustrate the results.

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Copyright
This is an Open Access article, distributed under the terms of the Creative Commons Attribution-NonCommercial-ShareAlike licence (http://creativecommons.org/licenses/by-nc-sa/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the same Creative Commons licence is included and the original work is properly cited. The written permission of Cambridge University Press must be obtained for commercial re-use.
Corresponding author
*Corresponding author. Emails: akpalu@wider.unu.edu; wakpalu@yahoo.com
References
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Environment and Development Economics
  • ISSN: 1355-770X
  • EISSN: 1469-4395
  • URL: /core/journals/environment-and-development-economics
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