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How Costly is Modern Maritime Piracy to the International Community?

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Author Info

  • Sami Bensassi
  • Inmaculada Martínez-Zarzoso

Abstract

This paper focuses on the impact of maritime piracy on international trade. Piracy increases the cost of international maritime transport through an increase in insecurity regarding goods deliveries. Bilateral trade flows between the main European and Asian countries over the 1999 to 2008 period are used to estimate an augmented gravity model that includes various measures of piracy acts. We found robust evidence indicating that maritime piracy reduces the volume of trade; the effect of ten additional vessels hijacked being associated to an 11% decrease in exports. Using these results, the international cost of piracy in terms of trade destruction is estimated to be 28 billion dollars. Finally, we compare the cost of low intensity conflict like Somalia, to the cost of a full scale conflict (Afghanistan) and to the cost of an autarkic state (North Korea) for the international community in the year 2008.The results indicate that the cost of war more than doubles the cost of low intensity conflict.

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File URL: http://hdl.handle.net/10.1111/roie.12000
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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 20 (2012)
Issue (Month): 5 (November)
Pages: 869-883

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Handle: RePEc:bla:reviec:v:20:y:2012:i:5:p:869-883

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References

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  1. S. Brock Blomberg & Gregory D. Hess, 2006. "How Much Does Violence Tax Trade?," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 599-612, November.
  2. Inmaculada Martínez-Zarzoso & Gordon Wilmsmeier, 2008. "Determinants of Maritime Transport Costs. A Panel Data Analysis for Latin American Trade," Ibero America Institute for Econ. Research (IAI) Discussion Papers 172, Ibero-America Institute for Economic Research.
  3. Leeson, Peter T., 2007. "Better off stateless: Somalia before and after government collapse," Journal of Comparative Economics, Elsevier, vol. 35(4), pages 689-710, December.
  4. José de Sousa & Daniel Mirza & Thierry Verdier, 2009. "Trade and the Spillovers of Transnational Terrorism," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 145(IV), pages 453-461, December.
  5. Maximo Mejia & Pierre Cariou & Francois-Charles Wolff, 2009. "Is maritime piracy random?," Applied Economics Letters, Taylor & Francis Journals, vol. 16(9), pages 891-895.
  6. James E. Anderson & Douglas Marcouiller, 2005. "Anarchy And Autarky: Endogenous Predation As A Barrier To Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 189-213, 02.
  7. James E. Anderson, 2008. "Commercial Policy in a Predatory World," Boston College Working Papers in Economics 703, Boston College Department of Economics.
  8. Powell, Benjamin & Stringham, Edward, 2009. "Public choice and the economic analysis of anarchy: a survey," MPRA Paper 26097, University Library of Munich, Germany.
  9. Anderson, James E. & Bandiera, Oriana, 2006. "Traders, cops and robbers," Journal of International Economics, Elsevier, vol. 70(1), pages 197-215, September.
  10. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  11. Douglas Marcouiller, S.J., 2000. "Hijacking, Hold-Up, and International Trade," Boston College Working Papers in Economics 477, Boston College Department of Economics.
  12. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
  13. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
  14. Helen B Bendall, 2010. "Cost of piracy: A comparative voyage approach," Maritime Economics and Logistics, Palgrave Macmillan, vol. 12(2), pages 178-195, June.
  15. Nitsch, Volker & Schumacher, Dieter, 2004. "Terrorism and international trade: an empirical investigation," European Journal of Political Economy, Elsevier, vol. 20(2), pages 423-433, June.
  16. Mirza, Daniel & Verdier, Thierry, 2008. "International trade, security and transnational terrorism: Theory and a survey of empirics," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 179-194, June.
  17. Michele Fratianni & Heejoon Kang, 2006. "International Terrorism, International Trade, and Borders," Working Papers 2006-13, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
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  1. How Costly is Modern Maritime Piracy?
    by UDADISI in UDADISI on 2013-01-17 01:12:00
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Cited by:
  1. Singh, C. & Bedi, A.S., 2012. "‘War on piracy’: the conflation of Somali piracy with terrorism in discourse, tactic and law," ISS Working Papers - General Series 543, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
  2. Inmaculada Martínez-Zarzoso & Sami Bensassi, 2011. "The price of modern maritime piracy," Ibero America Institute for Econ. Research (IAI) Discussion Papers 213, Ibero-America Institute for Economic Research.

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