Cod Today and None Tomorrow: The Economic Value of a Marine Reserve

R. Quentin Grafton, Tom Kompas and Pham Van Ha


Using data from what was once one of the world’s largest capture fisheries, the northern cod fishery, the economic value of a marine reserve is calculated using a stochastic optimal control model with a jump-diffusion process. Counterfactual analysis shows that with a stochastic environment an optimal-sized marine reserve in this fishery would have prevented the fishery’s collapse and generated a triple payoff: raising resource rents even if harvesting was “optimal”; decreasing recovery time for the biomass to return to its former state, smoothing fishers’ harvests and resource rents; and lowering the chance of a catastrophic collapse following a negative shock. (JEL Q22, Q57)

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