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Ecological Economics 176 (2020) 106717

Contents lists available at ScienceDirect

Ecological Economics
journal homepage: www.elsevier.com/locate/ecolecon

Do Aquaculture Farmers Have an Incentive to Maintain Good Water T


Quality? The Case of Small-Scale Shrimp Farming in Indonesia

Venticia Hukom , Rasmus Nielsen, Mette Asmild, Max Nielsen
University of Copenhagen, Department of Food and Resource Economics, Rolighedsvej 25, 1958 Frederiksberg C, Denmark

A R T I C LE I N FO A B S T R A C T

Keywords: While shrimp is the most important farmed seafood product worldwide, its production often induces negative
Shrimp farming externalities as discharge of nutrients to the aquatic environment. If farmers have an incentive to maintain good
Culture system farm-level water quality, it may also positively affect the surrounding environment, reducing the risk of eu-
Sidoarjo trophication in downstream river systems. If this is done, then the need for public intervention regulating the
Indonesia
externalities may be reduced. This study analyzes the incentives for farmers to maintain good water quality by
Environmentally sustainable aquaculture
identifying whether technical efficiency increases with improved water quality. Based on interviews with 183
shrimp farmers producing Litopenaeus vannamei and Penaeus monodon in Sidoarjo, Indonesia, technical efficiency
was estimated using data envelopment analysis (DEA). A positive correlation between good water quality and
technical efficiency was identified using a second stage DEA, but only found in L. vannamei. L. vannamei farmers
thus have an incentive to improve farm-level water quality, potentially decreasing the need for public inter-
ventions. Moreover, the technical efficiency of farmers of P. monodon was significantly higher than for farmers of
L. vannamei. The higher productivity and environmental robustness of P. monodon indicate a possibility for
revitalizing the global supply of the species after two decades of stagnation.

1. Introduction due to negative environmental impacts related to land use changes,


water and soil pollution, and mangrove destruction (FAO, 2018a,
Sustainable growth necessitates the internalization of externalities 2018b; Jayanthi et al., 2018; Ottinger et al., 2016; Primavera, 2006).
in any given production decision. Regulation is often considered the Shrimp aquaculture in Indonesia contributes to 7% of the global shrimp
necessary instrument for regulating aquaculture production (Nielsen, production (FAO, 2018a, 2018b), and Indonesia has a long tradition of
2012; Nielsen et al., 2014; Abate et al., 2016). While regulation could shrimp farming (see appendix 1). In the Sidoarjo region, shrimp
ensure that producers internalize environmental impacts, in some cases, farming has existed for more than three hundred years (Murai, 1988),
producers could also internalize them without public intervention making it an appropriate place to study the interactions between water
(Coase, 1960). One such example is sea-cage farming in Norway, where quality and farm economics. The unique pond shape and extensive
producers have managed to internalize externalities originating from system have been passed on from generation to generation. Local
feed waste and diseases that negatively influence both the local en- shrimp farmers have managed to survive, even though the rivers that
vironment and farm productivity. These issues were largely resolved by serve as the primary source of water are polluted, not only from shrimp
innovations in feed, vaccines and technology, allowing farmers to uti- production and other industries but also from the mud volcano incident
lize feed more efficiently and moving production further from the coast in 2006 (Fitrianto, 2012). Considering the poor water quality
(Asche et al., 1999. Tveteraas, 2002). Hence, the need for public in- (Purwaningsih and Notosiswoyo, 2013; Kure et al., 2014), the cap-
tervention can be reduced in cases where farmers are negatively af- ability to survive might be related to the shrimp farmer's skills and
fected by the environmental impact of their own production. Knowl- ability to use their inputs efficiently to produce the highest output
edge of how farmers internalize environmental impacts is therefore possible (technical efficiency).
important, especially when production takes place in developing The purpose of this article is to provide knowledge on the re-
countries without strict environmental enforcement (Abate et al., lationship between water quality and technical efficiency to investigate
2016). whether shrimp farmers have an economic incentive to manage the
Shrimp aquaculture is one sector that may face reduced productivity water quality in production ponds and thereby internalize the


Corresponding author.
E-mail address: vh@ifro.ku.dk (V. Hukom).

https://doi.org/10.1016/j.ecolecon.2020.106717
Received 7 August 2019; Received in revised form 6 May 2020; Accepted 18 May 2020
Available online 05 June 2020
0921-8009/ © 2020 Elsevier B.V. All rights reserved.
V. Hukom, et al. Ecological Economics 176 (2020) 106717

externality. If the relationship exists, then it indicates a strong incentive 2 ppm) and high ammonia (above 1 ppm) induce stress on shrimp,
to internalize the externalities of extensive shrimp farming. The water making them prone to diseases and reducing the growth rate. Moreover,
quality parameters of the individual ponds were treated as exogenous dissolved oxygen is produced by photosynthesis or comes from in-
variables in a second-stage analysis of the data envelopment analysis flowing water exchange, aeration and diffusion and is consumed by
(DEA) score to investigate the relationships of these parameters with respiration of the phytoplankton, shrimp and fish in the ponds. These
the technical efficiency of the shrimp farmers. metabolic activities produce ammonia. However, Hopkins et al. (1993)
The first hypothesis is that water quality is correlated with the argue that ammonia is also produced when organic matter is decom-
technical efficiency of the individual farms. This hypothesis tests posed. The higher the concentration of ammonia in the water, the more
whether a shrimp farmer's efficiency in using inputs increases with toxic the water is for the organisms living in it. Allan et al. (1990) found
good water quality. If technical efficiency and good environmental that decreased dissolved oxygen increased the acute toxicity of am-
practices are correlated, then the environmental problems may be re- monia, with 0.21 ppm being the “minimum acceptable” for P. monodon.
duced by farmers acting in their own interest, as shown for Norwegian McGraw et al. (2001) confirmed that survival in penaeid shrimp in
salmon farming. Such a finding would indicate that farm management earthen ponds increased as dissolved oxygen increased from 1.1 ppm to
could play a more substantial role when regulators want to regulate the 4.6 ppm. Finally, Kautsky et al. (2000) noted that changes to extreme
environmental impacts of shrimp farming. Nevertheless, internalizing levels of these parameters cause mortality.
one environmental problem may not resolve all environmental issues Boyd (1989) studied the role of the pH value in shrimp farming. It
(Tveteraas, 2002), and regulation may be needed for other environ- fluctuates during the day and night with an optimal pH value between 6
mental problems, such as the abundant plastic wastes. and 9. Values outside this range cause stress, less efficient feed con-
The second hypothesis is that the technical efficiency of groups of version and thereby lack of growth. Allan and Maguire (1992) found
farms differs between species and production systems. Testing this that low pH levels can cause soft shells in P. monodon, while Han et al.
hypothesis will also indicate which species among the two dominant (2018) found that L. vannamei is more resistant to higher rather than
cultured shrimp is more susceptible to a polluted environment and thus lower pH values.
may be more efficiently produced in the future. Currently, many Soft shell can also result from unsuitable salinity and temperature
farmers in shrimp-producing countries, such as Thailand, Malaysia, levels since they affect the level of dissolved oxygen. An increase in
Vietnam, and Indonesia, are shifting gradually to Penaeus monodon salinity and temperature reduces the maximum possible level of dis-
cultures from Litopenaeus vannamei cultures due to the higher selling solved oxygen in the water. Although 15–25 ppt is an ideal salinity for
price of the species (FAO, 2018a, 2018b). This study indicates which of cultured shrimp (Boyd, 1989), many shrimp farms have lower salinity
the two species are most resilient when taking environmental impacts levels due to a lack of available production sites (Flaherty et al., 2000).
on farm productivity into account. Moreover, in comparison to P. monodon, L. vannamei grows better in
This article analyzes the interaction between water quality and low saline water (Bray et al., 1994; Ye et al., 2009). Temperatures of
technical efficiency in aquaculture and, to the best of our knowledge, is 25–35 °C ensure the highest survival rates for L. vannamei, while tem-
the first on the technical efficiency of internalizing environmental peratures of 18–28 °C are optimal for P. monodon (Ponce-Palafox et al.,
concerns in the practice of shrimp culture in developing countries. The 1997; Wyban et al., 1995; Jackson and Wang, 1998). Changes to ex-
article is divided into six sections. Section 2 provides a review of the treme levels of these parameters cause mortality, and water quality
existing literature related to our research. The methodology is ex- parameters are therefore pivotal in management (Kautsky et al., 2000).
plained in section 3. Data and summary statistics are reported in section Recently, Mohanty et al. (2018) suggested using the water quality
4. The results are discussed in section 5, and conclusions are provided suitability index as an approach to improve operational efficiency.
in the last section. Finally, the third type of research simultaneously studied technical
efficiency and water quality. Martinez-Cordero and Leung (2004a,
2. Literature Review 2004b) introduced an environmentally adjusted input distance function
and a multicriteria decision-making model. They concluded that in-
One type of research analyzes the technical efficiency of shrimp tensification is not a sustainable way to perform shrimp farming.
farming using stochastic frontier analysis and data envelopment ana- However, since extensive farming is not sufficient to meet global de-
lysis. Shang et al. (1998) compared the economic efficiency of ex- mand, intensive farming may present a sustainable solution, as this
tensive, semi-intensive and intensive shrimp farming in Asia and occupies less land locally, particularly when producers internalize their
identified the highest cost of production in intensive systems, followed externalities. Few studies have identified the incentives of farmers to
by semi-intensive and extensive systems, except for in India, where reduce pollution; Asche et al. (1999, 2009) concluded that by im-
semi-intensive systems had the highest cost of production. Nguyen proving technical efficiency, Norwegian salmon farmers can simulta-
(2012) found higher technical efficiency in the production of P. neously reduce environmental impacts.
monodon than L. vannamei under the assumption of variable returns to
scale. 3. Methodology
At the scale of production, Kumar and Birthal (2004) concluded that
large-scale production is more efficient than small-scale production. Data envelopment analysis (DEA) introduced by Charnes et al.
They also found a correlation between technical efficiency and shrimp (1978) measures efficiency among decision-making units. The method
farmers' education, which corroborates Begum et al. (2013) considering is often used to identify best practices to provide producers with
age, nonfarm income, and location. Conversely, Nguyen and Fisher knowledge on how they can improve efficiency (Bogetoft and Otto,
(2014) found that extensive shrimp farming is relatively more efficient 2010). It is a nonparametric method; thus, no functional form is re-
and that efficiency is negatively correlated with pollution. Kumaran quired for the modeling. Furthermore, multiple inputs and outputs can
et al. (2017) analyzed extensive shrimp farming in India using sto- be used to estimate the “best practice frontier” (Hoff, 2007; Liu et al.,
chastic frontier analysis and found correlations between technical ef- 2013; Cook et al., 2014). DEA has been used in many efficiency studies
ficiency and farm characteristics such as stocking density, feed quan- for banking, healthcare, education, and agriculture. Sharma and Leung
tity, duration of culture and technology adoption, which confirms the (2003) and Iliyasu and Mohamed (2016) focused on shrimp farming
results of Reddy et al. (2008). (Gunaratne and Leung, 1997; Shang et al., 1998; Nguyen and Fisher,
Another type of research focuses on water quality and management. 2014).
Boyd (1989) pointed to the importance of water quality management in Using mathematical programming, an input-oriented DEA model is
shrimp farming with his finding that low dissolved oxygen (less than presented below based on Bogetoft and Otto (2010):

2
V. Hukom, et al. Ecological Economics 176 (2020) 106717

Table 1
Descriptive statistics of sociodemographic variables.
Variable Traditional L. vannamei Traditional plus L. vannamei Traditional Traditional plus P. monodon
(N = 58) (N = 38) P. monodon (N = 16)
(N = 71)

Experience (years) Average 19 16 18 28


SD 11 11 11 15
Min 3 2 1 4
Max 40 50 50 52
Age Average 48 44 48 51
(years) SD 10 9 9 8
Min 25 24 28 36
Max 72 63 75 64
Pond area Average 5 6 3 2
(area) SD 6 15 4 1
Min 1 1 0.5 1
Max 34 100 30 6
Monoculture/ No other species 10 20 3 0
polyculture (farms) Milkfish 46 12 68 16
Tilapia 2 6 0 0
Ownership status (farmer) Owner 28 20 37 9
Rent 11 3 10 1
Worker 19 16 24 6
Education (farmer) No education 10 5 16 1
Elementary school 20 12 26 9
Middle school 12 8 13 2
High school 8 12 11 4
Bachelor's degree 7 1 5 0
Postgraduate 1 0 0 0

min → E 4. Study Area and Data

E, λ1, …..,λS Sidoarjo, located on Java Island in Indonesia, has two million in-
habitants, with 6% working in the agricultural or aquaculture sectors.
Subject to: The temperature ranges from 20 °C to 35 °C, which makes it a perfect
place to culture black tiger shrimp (P. monodon) and whiteleg shrimp
S
E x io ≥ (L. vannamei), which grow optimally at 25 °C–32 °C (Boyd and Tucker,
∑ λs xis , i = 1, ..…,m
s=1 2012). In Sidoarjo, most shrimp production systems are extensive and
referred to as “traditional” if no feed is added to the pond and “tradi-
S tional plus” if additional feed is used. The only difference between the
yjo ≤ ∑ λsyjs , j = 1, ……,n two systems is the additional feeding in the “traditional plus” farms.
s=1 The samples of shrimp farmers were randomly chosen from different
districts in Sidoarjo, where the shrimp farms are located near the
λs ≥ 0 coastal area. The local governments sent invitations to all the local
shrimp farmers to participate in the interviews. The invitation was
where S is the total number of decision-making units, which, in this followed by a visit to each of the shrimp farmers who was willing to
study, is shrimp farms. xis is the i-th input of the s-th DMU, and yjs is the participate in an interview. The data were collected using a ques-
j-th output of the s-th DMU, whereas m and n denote a number of inputs tionnaire and in-depth, face-to-face interviews with each shrimp farmer
and outputs, respectively. The value acquired for E is the technical ef- and a water quality analysis.
ficiency score for the shrimp farm (xo, yo), which ranges between 0 and In total, 350 farmers who identified themselves as shrimp farmers
1. If E equals 1, then shrimp farmers can utilize the necessary minimum were interviewed between October 2017 and June 2018 in eight major
inputs to produce the possible maximum output, hence making this shrimp-producing districts in Sidoarjo. However, after a thorough data-
approach technically efficient. Finally, λ is a vector of S weights. In this cleaning process, only 183 farms, of which at least 40% of the total
article, variable returns to scale were chosen with an assumption that production value came from shrimp, were included in the analysis. The
shrimp farmers do not produce at their optimal size (Rasmussen, 2012). excluded farmers were large-scale farmers using intensive technology,
To confirm the second hypothesis, after estimating the technical farmers that had a share of shrimp produced in the polyculture systems
efficiency scores for each farm using DEA, the Mann-Whitney test at less than 40% of the production value (e.g., due to low survival rate
(Wijnand and van de Velde, 2000) was applied. The Mann-Whitney test of shrimp in those particular cycles) and farmers with more than three
is a nonparametric test that was used to resolve whether the two groups species in the polyculture systems. Among the 183 shrimp farmers, 96
commence from the same population. Once the groups were estab- were producing L. vannamei. Of these producers, 58 farms used tradi-
lished, Spearman's nonparametric correlation was used for further tional culture systems, and 38 used traditional plus culture systems. The
second-stage DEA, where the first hypothesis was tested. Spearman's remaining 87 farmers produced P. monodon, with 71 using traditional
test is selected when the efficiency score is not normally distributed, systems and 16 using traditional plus culture systems (Table 1).
with small numbers of observations, and when a linear relationship On average, P. monodon shrimp farmers have more years of ex-
between variables is not mandatory (Artusi et al., 2002; Labajova et al., perience than L. vannamei farmers at the same age. Pond areas seem to
2016). A second-stage analysis of a DEA score is a method for relating be larger for L. vannamei culture than for P. monodon culture and are
the efficiency score to exogenous variables that might affect efficiency combined with the production of milkfish and tilapia, whereas P.
(Hoff, 2007) but are not included as production input (e.g., water monodon culture most often includes milkfish production because P.
quality variables).

3
V. Hukom, et al. Ecological Economics 176 (2020) 106717

Table 2
Descriptive statistics of the variables used in the DEA.
Output or Input Traditional Traditional plus L. vannamei Traditional Traditional plus
L. vannamei (N = 38) P. monodon P. monodon
(N = 58) (N = 71) (N = 16)

Yield (USD) Average 19,148 30,634 7524 6820


SD 65,782 68,137 5717 3089
Min 387 1169 328 2660
Max 496,930 380,005 29,304 11,692
Seed Average 823 2108 310 129
(in 1000 pcs) SD 1365 4841 471 128
Min 75 155 35 40
Max 9000 30,000 3250 585
Feed (USD) Average 81 26,556 48 1040
SD 146 110,761 113 840
Min 5 150 5 22
Max 876 687,186 730 3010
Lime (kg) Average 549 4384 335 147
SD 1037 19,402 476 79
Min 10 100 24 66
Max 6000 120,000 3000 300
Medicine (USD) Average 2127 329 85 142
SD 15,157 836 82 114
Min 2 4 4 6
Max 115,566 4417 548 412
Fuel (liter) Average 410 689 50 15
SD 1783 1828 135 12
Min 10 10 10 10
Max 13,500 11,200 1000 60
Labor (person) Average 8 10 8 7
SD 3 5 3 1
Min 3 4 3 4
Max 23 32 20 11

monodon can tolerate different levels of salinity (e.g., euryhaline or lack of nutrition, non-optimal environmental conditions, intensification
stenohaline). Most of the farmers who were interviewed are managers and low water quality (Flegel, 1997; Kautsky et al., 2000).
working on a farm and involved in the day-to-day work on the farm. During the interviews, in situ water quality measurements were
They most often graduated from elementary school and have been conducted either by the interviewer or by a government official
working as shrimp farmers ever since. Due to the lack of training, (Table 3). Water was sampled in the ponds of the interviewed farmers
shrimp farmers' record keeping is often minimal; in fact, they are fre- where the researcher was allowed to access the ponds, or the govern-
quently unaware of the importance of keeping records. However, in ment official conducted the test. The water quality measurement was
other parts of Indonesia, aquaculture field schools have increased their taken using equipment from a water quality laboratory, either owned
awareness of better practices (Bosma et al., 2019). by the government or privately owned. Dissolved oxygen and tem-
Consequently, time-series data were not available. The primary data perature were measured using a DO meter, and ammonia was measured
within this study were from the conducted interviews and in situ water by a combination of an ammonia test kit and a spectrophotometer. The
quality measurements, whereas secondary data were collected by local pH was measured by a pH meter, whereas salinity was measured by a
government officials. Data collected for this analysis included economic refractometer. Water exchange during the season is rather limited due
data (values and quantities) on output and input of production to the cost (fuel for pumping) and the risk of introducing diseases and
(Table 2), as well as water quality data (Table 3). Output included the contaminated water from the rivers into the ponds during the produc-
polyculture production of shrimp, milkfish, and tilapia. Due to multiple tion cycle. Although some shrimp farmers have options for tidal ex-
production, the output variable was measured as the total value instead change, there is limited water exchange for the same reasons. This
of quantities. The total value of costs was also used for the input vari- scenario indicates that higher water quality in individual ponds will
ables feed and medicine. The feed variable combined feed and fertilizer also be reflected in the water quality discharged from the farms at the
usage, whereas medicine was a combination of probiotics, vitamin C end of a production period.
and herbal treatments. Other inputs, such as seeds, lime, fuel and labor,
were measured in quantities. Lime was used to increase pH values in
5. Empirical Results and Discussion
water. Fuel was used when pumping water into ponds at the beginning
of a production cycle for water exchange and during harvest. Labor
The mean technical efficiency for an extensive shrimp farm in
included the number of workers on the farm who prepare, maintain,
Sidoarjo was 0.78. This value indicates that the average shrimp farm
and harvest the shrimp.
could reduce inputs by 22% without lowering output if the farm pro-
The use of inputs such as seed, feed, lime, fuel and labor in the
duced like those among the samples using best practices for production.
traditional plus L. vannamei was on average the highest among the
Farmers choosing to culture P. monodon had a higher technical effi-
groups. However, medicine was used the most in traditional L. van-
ciency than those who farm L. vannamei, with a mean efficiency score of
namei despite the common belief among shrimp farmers in Sidoarjo that
0.84 for traditional and 0.90 for traditional plus (Table 4). A higher
P. monodon is more susceptible to diseases because of its “captured
score for P. monodon than for L. vannamei was also observed in the study
broodstock” (Flegel, 2009). This increased medicine use might be be-
by Nguyen (2012) for shrimp farming in Vietnam.
cause more seeds are used for L. vannamei (Table 2), potentially leading
Farmers culturing L. vannamei had a different technical efficiency
to higher stocking densities or due to the different quality of seeds.
than farmers culturing P. monodon, at a 1% significance level (Table 5).
Disease outbreaks can originate from many different sources, such as
There were also significant differences at the 5% level (or less) in the

4
V. Hukom, et al. Ecological Economics 176 (2020) 106717

Table 3
Descriptive statistics of the variables used in the second stage of the DEA.
Water Quality Traditional Traditional plus L. vannamei Traditional P. monodon Traditional plus
L. vannamei (N = 38) (N = 71) P. monodon
(N = 58) (N = 16)

DO (ppm) Average 5.04 3.48 4.82 3.53


SD 1.26 1.34 1.22 1.33
Min 1.90 1.20 1.60 2.40
Max 8.40 6.10 9.00 7.19
Ammonia (ppm) Average 0.18 0.47 0.09 0.44
SD 0.30 0.29 0.22 0.34
Min 0.01 0.001 0.01 0.01
Max 1.50 1.50 1.00 1.50
pH Average 7.99 7.84 8.34 8.64
SD 0.67 0.61 0.54 0.46
Min 6.16 6.40 6.60 7.50
Max 9.68 9.00 9.10 9.00
Salinity (ppt) Average 14.16 11.05 20.07 20.25
SD 7.24 8.89 5.52 3.07
Min 1.00 1.00 4.00 15.00
Max 29.00 30.00 35.00 25.00
Temperature (°Celsius) Average 30.07 29.82 31.00 30.44
SD 2.54 1.83 1.85 1.26
Min 20.00 23.90 22.00 29.00
Max 35.50 33.00 33.00 33.00

technical efficiency for the two production systems (traditional vs tra- Table 5
ditional plus), for the two types of L. vannamei production systems, for Results for the significance of the different groups.
the two species in the traditional production system and for the two Mann-Whitney W p-value
species in the traditional plus production system. On the other hand, a
significant difference between the two production systems producing P. L. vannamei vs P. monodon 2641 0.000***
monodon was identified. This result corroborates the findings in Table 4 Traditional vs Traditional Plus 4386 0.005**
Traditional P. monodon vs Traditional Plus P. monodon 455 0.201
that for the species P. monodon outperforms L. vannamei and for the Traditional L. vannamei vs Traditional Plus L. vannamei 1559 0.000***
production systems, traditional L. vannamei is better than traditional Traditional L. vannamei vs Traditional P. monodon 1649 0.048**
plus L. vannamei. Thus, the second hypothesis of different technical Traditional Plus L. vannamei vs Traditional Plus P. monodon 96 0.000***
efficiencies between different groups of farms and species was con-
firmed for almost all combinations. ***, **, and * indicate significance at p < .001, p < .05, and p < .1, re-
spectively.
When all farms (overall) were tested, the levels of efficiency of the
shrimp farms were significantly negatively correlated with ammonia
but positively correlated with dissolved oxygen, pH, salinity and tem- water quality parameters for P. monodon. On the other hand, L. van-
perature (Table 6). Thus, an increasing level of ammonia in the water namei were more susceptible to changes in water quality. DO seemed to
reduces efficiency since the rho value was negative. This result was as significantly affect the traditional L. vannamei group. The positive
expected since higher levels of ammonia reduce growth rates (Chen and correlation between DO and efficiency was expected because the lit-
Kou, 1992). Higher levels of DO available for shrimp positively affect erature suggests that higher DO is better for shrimp growth (McGraw
growth (McGraw et al., 2001; Allan et al., 1990). The natural pH in et al., 2001; Allan et al., 1990). Ammonia was significant in both the
shrimp farming ponds in Sidoarjo was lower than the optimal pH for traditional and traditional plus systems for L. vannamei. As seen in
shrimp culture. Thus, the addition of lime is necessary to achieve better Table 2, a higher input of L. vannamei seeds might have caused a higher
production conditions, as reflected in the positive rho value for pH. stocking density than that of P. monodon. Since ammonia is produced by
However, water quality parameters seemed to generally only correlate the metabolic activities of shrimp and fishes, a higher stocking density
with the technical efficiency of L. vannamei. could lead to higher ammonia. Moreover, in traditional plus, using the
In the traditional system, no intervention was taken to change the additional feed in these extensive farms may have led to a less efficient
natural salinity level, which on average, was lower in Sidoarjo than the practice. Adding feed is good for growth, but only to a certain level; if
optimal levels for shrimp farming. Thus, to increase efficiency, a higher the feed is not consumed, then it can lead to an increase in ammonia,
level of salinity is still preferable on traditional farms. As such, the which is not efficient for production. Temperature was also significant
higher the salinity that a farmer can manage at a farm, the more effi- for traditional L. vannamei. Growth increased with temperature when it
cient the farm will be. Temperature was also significant but only in the was within the window of the optimal growth conditions for L. van-
traditional plus production system (Table 7). namei between 25 and 35 °C.
No correlation was found between the technical efficiency and Overall, the empirical results indicate that a correlation exists

Table 4
Technical efficiency score.
ALL Traditional L. vannamei Traditional plus Traditional P. monodon Traditional plus
L. vannamei P. monodon

Mean efficiency 0.78 0.78 0.63 0.84 0.90


Number of farms 183 58 38 71 16
Efficient farms 58 16 6 26 10
Min 0.27 0.31 0.27 0.34 0.67

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V. Hukom, et al. Ecological Economics 176 (2020) 106717

Table 6
Correlation between water quality and technical efficiency.
Water Quality Overall L. vannamei P. monodon Traditional Traditional plus

DO (ppm) Optimal 4–8 4–7 5. 3–8 4–8 4–8


S 799,836 94,214 109,256 269,541 30,044
p-value 0.003** 0.000*** 0.96 0.004** 0.29
Rho 0.21 0.36 0.00 0.24 −0.14
Ammonia (ppm) Optimal < 1 < 1 < 1 < 1 < 1
S 1,422,140 231,541 112,343 474,467 37,291
p-value 0.000*** 0.000*** 0.82 0.000*** 0.001**
Rho - 0.39 −0.57 −0.02 −0.32 −0.42
pH Optimal 6.8–9.0 6.8–9.0 8.0–8.6 6.8–9.0 6.8–9.0
S 849, 197 139,611 100,255 331,419 18,200
p-value 0.022** 0.60 0.42 0.40 0.024**
Rho 0.16 0.05 0.08 0.07 0.30
Salinity Optimal 15–32 15–25 15–32 15–32 15–32
S 786,605 111,424 120,441 302,387 18,482
p-value 0.001** 0.016** 0.36 0.079* 0.030**
Rho 0.22 0.24 −0.09 0.15 0.29
Temperature Optimal 26–30 28–30 26–30 26–30 26–30
S 891,958 141,925 100,427 342,158 19,951
p-value 0.087* 0.71 0.43 0.62 0.081*
Rho 0.12 0.03 0.08 0.04 0.23

***, **, and * indicate significance at p < .001, p < .05, and p < .1, respectively.

between technical efficiency and water quality, as the second-stage nutrient discharge is reduced, then it may have a positive effect on the
analysis of the DEA scores showed a significant correlation between the local aquatic environment, implying that the need for public interven-
technical efficiency scores and all water quality parameters, which af- tion to limit pollution may be reduced. As indicated by Tveteraas
firms the first hypothesis. The analysis further showed that the tech- (2002), however, regulation may still be needed to address other types
nical efficiency of L. vannamei farming was correlated with dissolved of externalities, e.g., to limit the abundant littering of plastic used in
oxygen, ammonia, salinity and temperature. The results indicate that L. aquaculture. As opposed to that for L. vannamei farmers, a correlation
vannamei farmers have an economic incentive to maintain high water between water quality and efficiency could not be identified for P.
quality in the ponds, which involves maintaining the tested water monodon farmers. This result indicates the continued need for inter-
quality variables within an optimal range for growing shrimp. The re- nalizing the externality of nutrient discharges for P. monodon farmers,
sults also support the second hypothesis that technical efficiency differs possibly through regulation. Hence, while L. vannamei farmers have an
between the species of shrimp produced and the production system incentive to maintain good water quality, farmers of P. monodon may
used. not have that incentive in the studied production systems.
The positive correlation between water quality and technical effi- Our study found that L. vannamei farmers have an incentive to take
ciency for L. vannamei farmers indicates that farmers have an incentive environmental concerns into account in their production and that im-
to improve water quality at the pond level. Improved water quality and proved technical efficiency at the farm level may benefit the overall
management of water at the pond level may also reduce the discharge environment, as found in the salmon farming industry (Asche et al.,
of nutrients into the aquatic environment outside the farm, especially 1999; Tveteras 2002; Asche et al., 2009). This finding aligns with stu-
when water exchange during the production season is limited. If dies identifying a self-regulating mechanism through good water

Table 7
Correlation between water quality and technical efficiency for the two farming systems of the two shrimp species.
Water Quality Traditional L. vannamei Traditional Plus L. vannamei Traditional P. monodon Traditional plus
P. monodon

DO (ppm) Optimal 4–7 4–7 5.3–8 5.3–8


S 20,339 10,669 50,333 835
p-value 0.003** 0.30 0.19 0.39
Rho 0.37 −0.17 0.15 −0.22
Ammonia (ppm) Optimal < 1 < 1 < 1 < 1
S 46,918 13,710 68,624 832
p-value 0.000*** 0.001** 0.20 0.40
Rho −0.44 −0.50 −0.15 −0.22
pH Optimal 6.8–9.0 6.8–9-0 8.0–8.6 8.0–8.6
S 33,111 8931 54,810 737
p-value 0.89 0.89 0.50 0.75
Rho - 0.01 0.02 0.08 −0.08
Salinity Optimal 15–25 15–25 15–32 15–32
S 23,962 8153 65,002 747
p-value 0.046** 0.51 0.45 0.71
Rho 0.26 0.10 - 0.08 - 0.09
Temperature Optimal 28–30 28–30 26–30 26–30
S 35,339 6388 53,213 586
p-value 0.51 0.066* 0.37 0.61
Rho −0.08 0.30 0.10 0.13

***, **, and * indicate significance at p < .001, p < .05, and p < .1, respectively.

6
V. Hukom, et al. Ecological Economics 176 (2020) 106717

quality management in shrimp farming (Thongrak et al., 1997). Finally, The implication of farmers having incentives to maintain good
the results confirm that applying the water quality suitability index can water quality is that externalities in the form of nutrient discharges
enhance operational efficiency, as suggested by Mohanty et al. (2018). from upstream farms to downstream farms, as well as to the down-
The implication of the combined findings that farmers culturing P. stream aquatic environment in river systems, are lower than what they
monodon are more efficient than farmers culturing L. vannamei and otherwise could have been. While the need for regulation to avoid the
cause more robust to changes in the water environment is that the risk of eutrophication following nutrient discharges may remain, the
studied production system of P. monodon becomes economically more need for regulation may be reduced with more efficient farming.
interesting relative to that of L. vannamei. This is particularly the case in Although fulfilling this incentive may only partially solve the problem,
areas where farmers currently produce L. vannamei and face environ- it can be important in developing countries with weak institutional
mental constraints in the form of low water quality. Hence, the sub- settings for implementing regulations in the form of tradable pollution
stantially larger growth rates of the supply of L. vannamei compared to permits or taxes. In such countries, co-management or strong local
that of P. monodon seen both worldwide and in Indonesia over the last norms may often be the only reliable method to internalize the nutrient
two decades (see appendix) may change to be in favor of P. monodon. externality. However, internalizing the nutrient externality may work
better when the right farmer incentives prevail and limit the environ-
6. Conclusions mental problem. The implication of the combined presence of in-
creasing environmental problems and the resulting lower water quality
The study concludes that knowledge on the correlation between in shrimp-producing countries in addition to the higher technical effi-
water quality and technical efficiency mirrors the incentive farmers ciency and environmental robustness of P. monodon farmers over L.
have to internalize externalities. The second-stage analysis of the DEA vannamei farmers is that P. monodon is becoming relatively revitalized
scores confirmed the first hypothesis of a positive correlation between a as an important supply growth species in the world shrimp market.
farm's technical efficiency and good water quality for farmers of L. Future research could focus on how collaboration between shrimp
vannamei. The farmers implementing best production practices (better- farmers in river basins could be initiated using the results from this
input management) have higher water quality within their ponds. study as an incentive for more cooperation. Furthermore, the inclusion
Farmers who cultured L. vannamei therefore have economic incentives of more environmental and social indicators, such as soil quality, bio-
to manage their water quality because bad water quality in the ponds diversity, farmer's knowledge, technical support, cooperation between
will have negative effects on their productivity. Thus, the L. vannamei farmers, adoption of new technologies and credit support, would be
shrimp farmers in Indonesia have an incentive to maintain good water useful for obtaining a better understanding of how these are related to
quality. The results indicate that these Indonesian shrimp farmers may technical efficiency.
be part of the solution for addressing some of the environmental chal-
lenges of nutrient discharges while maintaining good water quality at
the farm level to benefit both farm productivity and the environment. Declaration of Competing Interest
For the farming of P. monodon, technical efficiency was not correlated
with water quality. The authors declare that they have no known competing financial
The results also reveal that in comparison to L. vannamei, P. interests or personal relationships that could have appeared to influ-
monodon was less affected by the water quality parameters selected ence the work reported in this paper.
within this analysis. The mean technical efficiency score was highest for
traditional plus P. monodon (0.90), followed by that for traditional P.
monodon (0.84), traditional L. vannamei (0.78), and traditional plus L. Acknowledgments
vannamei (0.63). Thus, the DEA analysis confirms the second hypothesis
and supports the conclusion that inefficiency exists among traditional This study was supported by a grant from the Indonesia Endowment
shrimp farmers in Indonesia and that technical efficiency could be Fund for Education funded by the Ministry of Finance (LPDP), Contract
improved by reducing input and considering the choice of species and number : PRJ-65/LPDP.3/2016, Republic of Indonesia. The funding
production system. In general, culturing P. monodon had a higher agency had no role in study design, data collection, data interpretation,
technical efficiency than culturing L. vannamei. or the decision to submit the work for publication.

Appendix A. Appendix 1. The case of shrimp farming development in Indonesia

Shrimp farming in Indonesia started as a byproduct of milkfish production in brackish water ponds known as “tambak.” It has existed since the
15th century, with an extensive production form being used due to its lower risk and higher quality than that of intensive farming systems
(Kusumastanto, 1994; Muluk and Bailey, 1996). The rapid international demand for shrimp in the 1960s and 1970s generated a significant increase
in fishing efforts, with catches of 1.7 to 1.8 million MT. This development promoted shrimp export in Indonesia, with shrimp later becoming one of
the primary export commodities. In this period, most shrimp from Indonesia were wild-caught using trawlers (Bailey, 1988).
When the Indonesian government started to regulate and reduce trawling at the beginning of the 1980s due to overexploitation, the in-
tensification of shrimp farming began. Donor support and government subsidies increased the possibilities for expansion in new regions where
“tambak” had never been used before as a means to continue export growth. By the end of the 1980s, many small-scale farmers had incorporated
private companies that provided water, electricity, finance, and technical assistance, with intensive systems growing in number (Yusuf, 1995; Muluk
and Bailey, 1996). In this first “expansion,” mainly Penaeus monodon was cultured, as displayed in Fig. 1. However, intensification resulted in a
disease outbreak in the late 1990s. With the relatively higher risk in the more intensified systems, many small-scale shrimp farmers switched back to
extensive production systems (Kusumastanto et al., 1998; Rimmer et al., 2013).
Broodstock of Penaeus monodon primarily comes from capture fisheries, and these broodstock are susceptible to viral and bacterial diseases.
However, in 2000, an innovation in the shrimp industry called specific pathogen-free broodstock for Penaeus vannamei was introduced. The seed
supply for Penaeus vannamei became more reliable than that for Penaeus monodon (Flegel, 2009). This availability led to a shift in species to Penaeus
vannamei, as shown in Fig. 1. Simultaneously, a second “expansion” occurred, where the Asian economic crisis caused an exchange rate drop that led
to a remarkably higher selling price of shrimp exported to the United States and Japan (Rimmer et al., 2013). Since then, Penaeus vannamei has been
the main shrimp species produced in Indonesia and worldwide, globally accounting for 65% of the total shrimp production from fisheries and
aquaculture in 2016, whereas Penaeus monodon accounted for 15% (FAO 2018). The two species supply the integrated world shrimp market (Vinuya,

7
V. Hukom, et al. Ecological Economics 176 (2020) 106717

600

500

400

300

200

100

Indonesia P.monodon Indonesia L.vannamei

Fig. 1. Indonesia farmed shrimp production (1000 tons).

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

Global P.monodon Global L.vannamei

Fig. 2. Global farmed shrimp production (1000 tons).

2007; Asche et al., 2012; Ankamah-Yeboah et al., 2017; Nielsen et al., 2018; Hukom et al., 2020), where the trend is continuous growth, which is
similar to the trend in Indonesia. Hence, the result achieved in Indonesia most likely mirrors the situation in other shrimp-producing countries (See
Fig. 2).

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