The authority to manage natural capital tends to fall within boundaries that are the result of political rather than ecological considerations. Renewable biological resources are one category of natural capital that is particularly prone to mismatches between the spatial distribution of the resource and management boundaries set by political processes. Correcting these mismatches is critical for sustainability. In countries with federal systems of government, semi-autonomous regions (e.g., states or provinces) exist under a central federal government. In these systems, the authority to manage the resource may be held centrally by the federal government, or it may be relegated to the states. The question, then, is what trade-offs arise when management authority is held by a centralized authority or is decentralized? To address this question we analyzed a bioeconomic model of a resource system in which the tension between centralized versus decentralized control is common: marine fisheries. The model assumes a single country's fishery spans two self-interested states and represents the share of the stock that falls under the authority of each. We compared management performance in terms of the economic value of extraction from and long-term abundance of the stock.
Results/Conclusions
In our models, we represented federal management as constrained to be spatially uniform either in fishing effort or in the imposition of a tax on effort. We modeled decentralized management as a dynamic game between two states who attempt to maximize their economic return from fishing over time by choosing effort levels in each period subject to the actions of the other state. The outcome is that states pursue a dynamic fishing policy that is a Nash equilibrium of the interstate game. Our analysis reveals that the degree of spatial heterogeneity in the biological parameters, and the nature of dispersal of fish between the two states, play critical roles in determining the relative performance of federal versus decentralized management. Broadly, our results show that uniform federal management is preferred when dispersal is bi-directional, and state management is preferred with source-sink dispersal, when the initial condition is a depleted stock. Environmental heterogeneity also favors a decentralized approach. The implications of federalism for the economic value and fairness of natural capital management are increasingly the focus of public policy debates. We argue that future analysis should adopt a dynamic perspective that accounts for resource growth and movement across space.