The development of Greenland's shrimp fishing and processing industry since 1979: A study in applied economics

Abstract

Shrimp fishing and processing is Greenland's dominant industry, and one which is crucial to the country's economy. However, since the late 1980s it has faced a state of crisis characterised by overcapacity, poor returns and threatened stocks. Despite these facts, the literature in this area is practically non-existent. This thesis aims to make a contribution towards filling this gap by presenting an applied economic study of the development of Greenland's shrimp fishing and processing industry since the introduction of home rule in 1979. It attempts to arrive at an understanding of why the industry reached a point of crisis, and, thereby, to evaluate the efficacy of reform measures introduced by the Greenland Home Rule Authority. The study is based upon both qualitative and quantitative data collected during fourteen months of fieldwork. The thesis has two parts. In the first, an account is given of the recent political and economic history of Greenland. The structure and development of the country’s shrimp fishing and processing industry is examined, along with the role the industry plays within Greenland's economy. The second part takes as its starting point a review of the fisheries economics literature. A theoretical model incorporating Schaefer-Gordon population dynamics and a production function which differentiates between different size-classes of shrimp is then developed. This model is used alongside analytical tools taken from the fields of microeconomics and industrial economics as a framework for conducting the empirical analysis which follows. Five main issues are considered. These are: (i) technical efficiency and the behaviour of firms within the industry; (ii) overcapacity, discarding and the threat to stocks in the offshore fishery; (iii) tax policy and its impact upon the offshore shrimp fishing industry; (iv) regulation, individual vessel performance and the development of the inshore shrimp fishing industry; and (v) the problem of overcapacity in the land-based processing sector. The main thrust of the thesis centres around the need to create a regulatory framework and set of incentives that will promote the efficient use of resources and discourage socially undesirable forms of behaviour. It is shown how the Greenland Home Rule Authority has attempted to do this by establishing a formal market for the right to participate in the inshore and offshore fishe1ies. However, this thesis argues that further measures need to be taken, not least ones designed to increase the degree of competitive pressure felt by participants in the industry. A further conclusion is that carefully formulated tax policy and the adoption of a holistic approach have a central role to play in solving the industry's problems.