Long run price flexibilities for high valued UK fish species: a cointegration systems approach

In this paper, the own and cross-price flexibilities for four high valued s pecies (bass, lobster, sole and turbot) landed in the UK are estimated. Sys tem of equation models were developed using the vector error correction mod el (VECM) approach. Johansen's multivariate approach was used to obtain est imates of the long run steady state relationship (vectors) between fish pri ces and landings. To find unique vectors (i.e. no interdependent vectors) z ero restrictions on the coefficients of the price variables were applied so that the model effectively contained quantity independent variables only. The resulting vectors were four unique cointegration long run relationships of monthly fish prices and landings. Various tests suggested that the vari ables were I(1) nonstationary variables. The model also suggested that ther e are more than one cointegration vectors (relationships) between the varia bles. It was found that bass has the largest absolute long run own price fl exibility. Bass and lobster were found to be weak substitutes while sole an d turbot were found to be substitutes. The results suggest, however, that t he relationship is not symmetrical, with the quantity of sole having a grea ter effect on the price of turbot than turbot on sole.