'El Niño' Effects and Biomass Endogeneity in a Harvest Function : The Chilean Jack Mackerel Fishery

The main goal of this paper consists in estimating the input parameters of an annual harvest function for the Chilean jack mackerel stock; particularly, the effects of biomass on catch. One of the main problems faced is that the biomass variable is possibly endogenous, which would bias the estimators if the problem remains unsolved. Our empirical strategy consists in estimating a per vessel harvest function using panel data, which allows us to control for vessels' unobserved heterogeneity, and episodes of 'El Niño' phenomenon as valid instrumental variable for biomass, which allows us to control for the potential biomass endogeneity. This strategy produces consistent estimates of the biomass coefficient. The results, using a panel of industrial vessels operating in the central-southern region of Chile during the period 1985-2002, show that the endogeneity of the biomass variable biases upwardly the magnitude of its coefficient in a Cobb-Douglas harvest function. In the case of our data, the endogeneity bias even changes the sign of the catch-to-biomass elasticity. A first contribution of the paper is to address the endogeneity of biomass in a harvest function, an issue often underestimated in the empirical literature. A second contribution is related to 'El Niño' effects on the Chilean jack mackerel stock. The results show that an oceanic 'El Niño' episode not only has negative contemporaneous effects on jack mackerel biomass but also negative biomass effects lasting for at least two additional years