Cost Efficiencies of the Shrimp Fishery in Mexico: A Stochastic Frontier Analysis

Abstract

Fishing sector fuel subsidies are designed to increase profitability by reducing costs. However, despite the number of liters of fuel subsidized in 2018 in Mexico, there is no information available on the effectiveness of the subsidies in reducing cost inefficiencies. The purpose of this study was to estimate the cost efficiency of shrimp fishing companies in Mexico, as well as measure the impact of fuel subsidies on the cost inefficiency of the sector from 2003 to 2018. The True Fixed Effects model was used to represent a Cobb–Douglas stochastic production frontier, which included a shrimp fishing inefficiencies model. The results indicate that shrimp fishing companies could reduce their costs by 25% without reducing their catch levels. Fishing companies in the Gulf of Mexico were more efficient than those operating in the Gulf of California and the South Pacific. Fuel subsidies reduce cost inefficiencies, with a greater effect when the subsidy reaches a level of 20% of the total liters of subsidized fuel.