The Role of the Fishing Industry in the Icelandic Economy: A Historical Examination

Abstract

"Expansion and development of the fisheries was the driving force behind Iceland's economic transformation during the 20th century. Yet, the overriding importance of this sector fails to show up in national accounts -- such as contribution to GDP and employment statistics -- because they do not take into consideration the various ways economic activity in the maritime sectors affects other branches of the economy. In addition, the national accounts do not fully reflect the significant part played by the fisheries as the county's largest currency earning industry. This ignorance of the true contribution of the fisheries can lead policy makers to underestimate the effects shocks to the fisheries will have on the economy. In this paper, econometric methods are employed to estimate the overall contribution of the fishing industry to Icelandic GDP during the period 1963-1996. Using data on GDP, marine production, capital and labour, it is shown that in the long-run a 1% change in the value of fishing industry production will lead to a 0.42% increase in GDP growth. This is considerably higher than the 11% the national accounts attribute to the fisheries."