Sustainable Growth, Resource Rent and Taxes in Aquaculture

Abstract

Global aquaculture represents an opportunity for sustainable growth in supply of healthy food and private and public income, but also has environmental footprints and thus requires a balanced policy approach by governments. Salmon aquaculture has until recently experienced rapid growth, and periods of high profitability. In all producer countries, salmon aquaculture is subject to different regulations that indirectly restrict output at the firm level and may restrict global supply in the short run. The sector has become a candidate for extraordinary taxation in Norway, and a tax regime which is unique in the context of global food production is under consideration. An argument is that society allocates sea locations to salmon firms for free, and that these provide economic returns well above normal returns to capital due to the number of sites being limited, both in Norway and globally. To this end, this paper uses a panel data set to analyze patterns of productive performance and profitability in Norwegian salmon aquaculture to analyze whether these patters suggest economic rents or infra-marginal profits. We find significant variations in productive and economic performance over time and across firms, a variability that is inconsistent with a claim that all the economic profits are a resource rent generated by a natural resource in the form of limited aquaculture sites. Our results suggest that infra-marginal profits are important part of total profits in the salmon aquaculture sector.