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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 Barcelona Graduate School of Economics in its series Working Papers with number 626.

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Date of creation: Apr 2012
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Handle: RePEc:bge:wpaper:626

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

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References

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  1. Tony Venables & Alberto Behar, 2010. "Transport Costs and International Trade," Economics Series Working Papers 488, University of Oxford, Department of Economics.
  2. Benjamin A. Olken & Patrick Barron, 2009. "The Simple Economics of Extortion: Evidence from Trucking in Aceh," Journal of Political Economy, University of Chicago Press, vol. 117(3), pages 417-452, 06.
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  5. 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.
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  7. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  8. Inmaculada Martínez-Zarzoso & Sami Bensassi, 2013. "The Price Of Modern Maritime Piracy," Defence and Peace Economics, Taylor & Francis Journals, vol. 24(5), pages 397-418, October.
  9. 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.
  10. Dani Rodrik & Mark Rosenzweig (ed.), 2010. "Handbook of Development Economics," Handbook of Development Economics, Elsevier, edition 1, volume 5, number 6, January.
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  12. Dave Donaldson, 2010. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," NBER Working Papers 16487, National Bureau of Economic Research, Inc.
  13. Benjamin A. Olken & Rohini Pande, 2012. "Corruption in Developing Countries," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 479-509, 07.
  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. 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.
  16. Anja Shortland, 2011. ""Robin Hook": The Developmental Effects of Somali Piracy," Discussion Papers of DIW Berlin 1155, DIW Berlin, German Institute for Economic Research.
  17. 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.
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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. 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.
  2. Anja Shortland & Federico Varese, 2012. "The Business of Pirate Protection," Economics of Security Working Paper Series 75, DIW Berlin, German Institute for Economic Research.

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