Biological control of a parasite: The efficacy of cleaner fish in salmon farming

Managing pathogens is a challenge in biological production processes. To manage private risks and reduce externalities, biological controls leverage the technology of natural ecosystems and are often considered environmentally friendly alternatives to chemical controls. In salmon farming, parasitic sea lice reduce own-firm profitability by stressing fish and slowing growth and generate externalities by spreading to neighboring farms and threatening wild fish populations. Cleaner fish are a form of biological control based on ecological interaction that can be used instead of chemical control of sea lice, but little is known about their efficacy and value in commercial use. We estimate efficacy of cleaner fish using facility-level data. To identify exogenous variation in cleaner fish usage, we instrument site-level cleaner fish stocks using distance to cleaner fish farm with a commercial license. Cleaner fish use significantly reduces likelihood of sea lice levels exceeding regulatory threshold levels. Combining efficacy estimates with cost data and a structural model, we provide estimates of cost-effectiveness. Our results show that cleaner fish are privately cost-effective, which is consistent with high levels of adoption. However, cost-effectiveness also suggests that policy could encourage even more adoption of biological controls to reduce externalities.