Abstract

In this study, we develop a method to estimate the relationship between monitoring and enforcement (M&E) effort and a key but unobserved variable: non-recorded extraction of a natural resource (e.g., illegal fishing). We use a stochastic frontier model for the growth rate of the resource and decompose the technical inefficiency term into non-recorded extraction and true-inefficiency. In cases where true-inefficiency is independent of M&E, the parameter estimate for M&E effort directly identifies its marginal effect on non-recorded extraction. This approach is applicable to a wide range of natural resources, where the observed growth rate of the resource depends heavily on factors beyond human control, such as environmental conditions. Thus, this method provides a promising means for identifying illegal extraction that is typically unobservable to analysts and regulators. We demonstrate the usefulness of this approach through simulation and by applying the econometric framework to the Chilean abalone fishery.