Processing ashore of raw materials from the fisheries tend intuitively to recommend itself becausemore creation of value added in this manner should take place in Greenland. However, we observethe opposite tendency: production is shifted aboard on factory trawlers and catches are shippeddirectly to export markets or may be so after transshipping in e.g. Nuuk. It is shown that this actualdevelopment indeed is the prediction of location economics. In the case of unemployment it may beoptimal to secure raw materials for processing on plants ashore, an aim that may be achieved viasubsidies. The optimality of such policy is discussed using concepts from cost benefit analysis, andit is demonstrated how the shadow price of labor has a crucial role. Shifting to the macro levelcapacity restrictions on plants and on the labor market are pointed out. The effect of taking rawmaterial ashore is illustrated with a macro production function, which is assumed to have a positivemarginal product until the capacity limit is hit. This, however, may take place after the noninflationaryaugmenting level of employment has been reached. Finally the possibility of alternativeand better policies than the one relying on subsidies is touched upon.
|Udgiver||Copenhagen Business School, CBS|
|Status||Udgivet - 2004|
|Navn||Working Paper / Department of Economics. Copenhagen Business School|