Methodological Reflections on the Short-Run Johansen Industry Model in Relation to Capacity Management

The specification of a convex production technology is a potential issue in estimating firm-level Johansen plant capacity utilisation rates and their subsequent use in the short-run Johansen industry capacity model of the fishery. There are different plant capacity utilisation estimates with convex and nonconvex technologies. When entered as parameters in the short-run Johansen industry model, this leads to different distributions in the activity vectors. With non-convex technology, more vessels remain active in the fleet, and there is no longer an overestimation of the number of decommissioned vessels compared to the use of a convex technology. A second methodological reflection involves a way to trace the evolution of capacity over time and the possibility of formulating multi-period, short-run Johansen industry models using appropriate discrete time Malmquist productivity indices. Danish vessels provide an illustration for the convexity issue.