Open Access with Product and Labor Market Failure: The Case of Artisanal Fishing in Indonesia

In many developing countries a lack of property rights leads to unsustainable harvests of traditionally exploited renewable resources. Product and labor market failure due to trans-action costs can either exacerbate or offset this overexploitation. Combining a model of open access fisheries exploitation with a distance-based approach to incomplete markets, this paper explores potential conservation implications from labor and product market developments, such as enhanced transportation infrastructure. The model predicts that resource exploitation decreases in distance from efficient markets if the product price decays more rapidly over space than the opportunity cost of time. An empirical model is developed that distinguishes between product and labor market failure. It describes catch per unit effort across multiple fishing grounds that individually are characterized by open access equilibria with incomplete markets. The econometric model is estimated using data from a cross-sectional household survey of artisanal coral reef fishermen in Minahasa, Indonesia, taking account of fishermen heterogeneity. The effects of labor and product market characteristics are identified, and their impacts are of the expected sign and statistically and economically significant.