An analysis of local fresh fish demand and supply of Sri Lanka to assess the impact of fuel subsidies

Abstract

The purpose of this paper is to assess the factors affecting demand and supply for fresh fish in Sri Lanka and modelling demand and supply Functions. A partial-equilibrium analysis performed to understand fish supply response for significant change of the fuel subsidy policy. The time series data of per capita fish consumption of thirty years (1987-2016) were collected from published official data for the analysis. The autoregressive lag model based on linear-log functional form was used as the most appropriate model to estimate the demand and supply. The fish demand is a function of the consumers’ income; own price (fresh fish price) and price of substitutes (dried fish and chicken price). Lower cross price electricity of fish for other animal protein foods emphasised fresh fish has a weaken substitutability. Fresh fish price, number of boats registered for the fishing purpose and previous year fish harvest quantity motivate fishermen to catch more fish hence those variables have positive relationship with fish supply. The effectiveness of fuel subsidy to boost fisheries industry is questionable because 1% of fuel price subsidy only increases 0.030% of fish production and only truncate 0.021% of fish price in the market.