How Fuel Subsidy Reductions Reshaped Fishing Activity: Evidence from China's Policy Reform in the East China Sea

Code for the article "How Fuel Subsidy Reductions Reshaped Fishing Activity: Evidence from China’s Policy Reform in the East China Sea". Abstract This study examines the impact of fuel subsidy provision on fishing activity and unauthorized fishing following a 2016 reform to China’s fuel subsidy program for its fishing fleet, focusing on how fishers responded to the differential policy change. The reform reduced the total average subsidy payment by 69%, with larger vessels receiving 15.8% more relative to smaller vessels. This reform was driven by concerns about excessive government spending, high fuel consumption, and overfishing. We develop a theoretical model to explain these dynamics and validate its predictions using a Difference-in-Differences(DiD) approach. Our findings show that total fishing decreased, while unauthorized fishing hours increased in 16.6% after the reform, particularly in Taiwan and in disputed maritime zones. Furthermore, vessels that received lower subsidies were 2.5% more likely to exit the fishing sector, while those that remained increased their fishing-to-subsidy ratioas a strategy to compensate for the loss of competitiveness. Key words: Commercial Fishing, Fisheries Management, Fuel Subsidies, Unauthorized Fishing. JEL Classification: H23,O13,Q22,Q28.