Global markets and the commons: the role of imports in the US wild-caught shrimp market

The commons literature focuses heavily on rules and the behavior of resource users but places less emphasis on the returns to individual effort. However, for most resource settings, market conditions and associated resource prices are key drivers of exploitation effort. In a globalized world, import competition can strongly influence the incentives for individual resource users, a topic largely unexplored in the commons literature. Import competition is especially salient for seafood, one of the most internationally traded food groups. We analyze the US shrimp market, which was once dominated by domestic catches but is now mostly supplied by imports. For domestic producers (users of the commons), lower revenues result, while US consumers eat more shrimp at lower prices. Globalization changed the sources of price risk and compensation that domestic producers face and altered incentives to exploit the commons. In a market dominated by domestic supply shocks, the price response to a shock moderates the effect on revenue and effort. In a market dominated by imports, domestic shocks are buffered by import adjustments, while price movements are determined by global shocks. Despite losses for the domestic fishery, globalization creates new incentives to coordinate effort and capture price premiums determined in the global market.

Automated summary

The commons literature focuses on rules and behavior of resource users but pays less attention to individual effort. However, market conditions and resource prices are crucial in determining the exploitation effort in actual resource settings. Import competition in a globalized world, which is largely unexplored in the commons literature, can strongly influence the incentives for individual resource users. This study analyzes the US shrimp market and finds that globalization has changed the sources of price risk and compensation for domestic producers, as well as altered incentives to exploit the commons.