Robbert Schaap (Heidelberg University) Risk, restrictive quotas, and income smoothing

Income shocks due to climate change or overexploitation can result in severe hardships for natural resource users who are unable to smooth consumption. Artisanal fishers in Chile vary in their ability to smooth consumption due to regulatory differences. Utilizing these regulatory differences, we find that survey participants that harvest species which are governed by restrictive quotas have preferences for more precautionary savings compared to survey participants whose harvest is not restricted. The inability to adjust harvest increases the importance of self-insurance through saving. Especially in developing countries, where formal saving opportunities are limited, policies that aim at stabilizing resource productivity through restrictive quotas need to account for available consumption smoothing strategies to avoid unintended welfare losses.

(joint work with Florian Diekert, Exequiel Gonzalez-Poblete, and Karin Loreto Silva Aedo)