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One Kind of Lawlessness: Estimating the Welfare Cost of Somali Piracy

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Author Info

  • Tim Besley
  • Thiemo Fetzer
  • Hannes Mueller

    ()

Abstract

This paper estimates the effect of piracy attacks on shipping costs using a unique data set on shipping contracts in the dry bulk market. We look at shipping routes whose shortest path exposes them to piracy attacks and find that the increase in attacks in 2008 lead to around a ten percent increase in shipping costs. We use this estimate to get a sense of the welfare loss imposed by piracy. Our intermediate estimate suggests that the creation of $120 million of revenue for pirates in the Somalia area led to a welfare loss of over $1.5 billion.

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Bibliographic Info

Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 898.12.

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Length: 66
Date of creation: 20 Apr 2012
Date of revision:
Handle: RePEc:aub:autbar:898.12

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Related research

Keywords: piracy; welfare loss; maritime transport; Somalia; private security; law and order; property rights;

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References

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  1. Attila Ambrus & Eric Chaney & Igor Salitskiy, 2011. "Pirates of the Mediterranean: An Empirical Investigation of Bargaining with Transaction Costs," Working Papers 11-24, Duke University, Department of Economics.
  2. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  3. James Feyrer, 2011. "Distance, Trade, and Income -- The 1967 to 1975 Closing of the Suez Canal as a Natural Experiment," 2011 Meeting Papers 1438, Society for Economic Dynamics.
  4. Benjamin A. Olken & Rohini Pande, 2011. "Corruption in Developing Countries," NBER Working Papers 17398, National Bureau of Economic Research, Inc.
  5. Barron, Patrick & Olken, Benjamin, 2007. "The Simple Economics of Extortion: Evidence from Trucking in Aceh," CEPR Discussion Papers 6332, C.E.P.R. Discussion Papers.
  6. Tony Venables & Alberto Behar, 2010. "Transport Costs and International Trade," Economics Series Working Papers 488, University of Oxford, Department of Economics.
  7. Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70.
  8. Douglass C. North, 1968. "Sources of Productivity Change in Ocean Shipping, 1600-1850," Journal of Political Economy, University of Chicago Press, vol. 76, pages 953.
  9. de Meza, David & Gould, J R, 1992. "The Social Efficiency of Private Decisions to Enforce Property Rights," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 561-80, June.
  10. Anja Shortland, 2011. ""Robin Hook": The Developmental Effects of Somali Piracy," Discussion Papers of DIW Berlin 1155, DIW Berlin, German Institute for Economic Research.
  11. Anne-Célia Disdier & Keith Head, 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 37-48, February.
  12. Attila Ambrus & Eric Chaney & Igor Salitskiy, 2011. "Appendix for Pirates of the Mediterranean: An Empirical Investigation of Bargaining with Transaction Costs," Working Papers 11-25, Duke University, Department of Economics.
  13. 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.
  14. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  15. Peter T. Leeson, 2007. "An-arrgh-chy: The Law and Economics of Pirate Organization," Journal of Political Economy, University of Chicago Press, vol. 115(6), pages 1049-1094, December.
  16. Dave Donaldson, 2010. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," NBER Working Papers 16487, National Bureau of Economic Research, Inc.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Pirates paper of the day
    by UDADISI in UDADISI on 2012-05-11 19:38:00
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Cited by:
  1. Anja Shortland & Federico Varese, 2012. "The Business of Pirate Protection," Economics of Security Working Paper Series 75, DIW Berlin, German Institute for Economic Research.
  2. Olaf J. de Groot & Matthew D. Rablen & Anja Shortland, 2012. "Barrgh-gaining with Somali Pirates," Economics of Security Working Paper Series 74, DIW Berlin, German Institute for Economic Research.

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