Choice of Remuneration Regime in Fisheries: The Case of Hawaii’s Longline Fisheries

One of the most prominent features of remuneration in Hawaii’s longline fisheriesindustry has been the norm of share contract regimes. This paper investigates whether theuse of the share contract regime is positively correlated to increased economic returns.The principal-agent framework is applied to develop a theoretical model for theremuneration choice. Empirical estimation is conducted using a switching regressionmodel that accounts for the effects of certain vessel characteristics on revenue, dependingon remuneration regime used (i.e., share contract or flat wage), as well as the potentialselection bias in the vessels’ contractual choice. Key findings from counterfactual simulationsindicate: (a) a negative selection related to choosing share contracts, and (b) flatwage vessels would experience significantly higher revenues if they switched to sharecontracts. Thus, even though the labor market in Hawaii’s longline fisheries relies uponforeign crew members, the results suggest that owners of flat wage vessels would benefit by applying share contracts to increase their revenues.