returns to scale must be used with caution within the context of fishery

production, however.

 Scale elasticities measure the percentage change in output given a

1 percent change in all inputs. Within the context of fishery produc-

tion, the resource stock constitutes an unobservable input. A simulta-

neous increase in all physical inputs which serves to increase catch

must necessarily alter the resource stock size. Thus, any true measure

of returns to scale in terms of only measured physical inputs is con-

founded by unobserved stock size changes. Given the incorporation of

the autoregressive process to account for such unobserved changes, the

estimated scale elasticity of 0.74023 can be considered as a reasonable

approximation.

 The catch equations underlying all stock production models have

assumed constant returns to fishing effort as pointed out in Chapter II.

If one is willing to accept that the autoregressive processes in the

estimated catch equations adequately account for changes in the resource

stock, the estimated scale elasticity for vessels may be used to conduct

an approximate test of the "constant returns" hypothesis. A t-test of

the null hypothesis of 0.74023 equal to one versus the alternative of

less than one can be rejected at the .05 level of significance. Given

the rejection of this hypothesis and the large absolute difference

between the estimated parameter and unity, it is apparent that the GMRFF

is characterized by diminishing returns to scale.


Derived Equilibrium Catch Equations


 The estimated catch equations in the form presented in Table 2

correspond to non-equilibrium equations. Non-equilibrium functions