Aquaculture is a rapidly growing food production technology, primarily in developing countries, and now accounts for over 50% of global seafood production. While aquaculture provides nutritious food and can alleviate poverty, diminish income inequality, and increase food security, there are significant environmental impacts and disease concerns. Environmental externalities are generally addressed with government regulations, although the extent to which this is possible depends on a country’s governance capacity. However, many environmental challenges in aquaculture are not pure externalities but also have private incentives associated with them as firms benefit from, e.g., lower disease pressure and faster growth with improved water quality. Hence, industry structure may also be important as these private benefits incentivize firms to collaborate. However, collaboration becomes more difficult as the number of stakeholders increases. Therefore, if they collaborate, one would expect externalities to be reduced in regions with fewer separate firms.
We research this hypothesis for salmon, the second largest aquaculture species globally by value and an industry that has experienced major disease challenges. Here we show that the prevalence of the most harmful negative externality in Chile and Norway, sea lice, is significantly reduced in regions with a higher degree of ownership concentration. As shown in Figure 1, regardless of the region (south – blue, central – green, north – red), the sea lice count increases as the biomass diversity increases, i.e., more farmers are holding salmon stocks. This result is significant in countries with limited governance capacity as it suggests that self-governance concerning environmental challenges can be facilitated by how production sites are divided between producers. Furthermore, there is often a strong focus on developmental policies geared toward small-scale farmers, which unintendedly increases firm heterogeneity. As a result, our research suggests that this may not be environmentally optimal.