The Endogeneity Problem in Applied Fisheries Econometrics: A Critical Review

The purpose of this essay is to bring attention to some serious problems that exist in econometric application of fisheries economic models. These problems in application are serious to the point of impeding our ability to do policy work. This essay will focus on two areas of econometric application; first, the violation of the fundamental exogeneity condition for applied econometrics E ( ε | X ) = 0 , where ε is a stochastic error term and X is a matrix of right-hand-side explanatory variables, and second, the inappropriate use of data that is available for analysis. Both problems deal with the econometric issues of omitted and proxy variables. I will also comment on data necessary to carry out proper fisheries econometric research and policy analysis. Simulation techniques based on a known population regression equation are used to illustrate the extent of the empirical problems. Injecting real data into the simulations shows the bias that we can bring forward to the policy arena.