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Fleet dynamics and overcapitalization under rational expectations

Da Rocha Alvarez, Jose Maria and Prellezo, Raul and Sempere, Jaume and Taboada-Antelo, Luis (2016): Fleet dynamics and overcapitalization under rational expectations.

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When individual stay/exit decisions depend on the opportunity cost of exiting, capital malleability is endogenously determined by the instruments used for stock rehabilitation. In a General Equilibrium framework, we characterize the transitional dynamics caused by stock rehabilitation policies. We show that a management policy based on input controls generates less exit, a less productive fleet, and overcapitalization, as input controls require a higher number of firms to achieve the same biological targets. Using data from the Multiannual Plan for the Western Mediterranean, we show that the use of input controls generates a Spanish fleet around 14 percent higher than the one that would result from a non distortionary instrument.

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