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Gov-aargh-nance: "Even Criminals Need Law and Order"

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  • Olaf J. de Groot
  • Matthew D. Rablen
  • Anja Shortland

Abstract

We present a theoretical model postulating that the relationship between crime and governance is "hump-shaped" rather than linearly decreasing. State failure, anarchy and a lack of infrastructure are not conducive for the establishment of any business. This includes illegal businesses, as criminals need protection and markets to convert loot into consumables. At the bottom end of the spectrum, therefore, both legal business and criminal gangs benefit from improved governance, especially when this is delivered informally. With significant improvements in formal governance criminal activities decline. We use data from the International Maritime Bureau to create a new dataset on piracy and find strong and consistent support for this non-linear relationship. The occurrence, persistence and intensity of small-scale maritime crime are well approximated by a quadratic relationship with governance quality. Organised crime benefits from corrupt yet effective bureaucrats, and informally governed areas within countries.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.372927.de/diw_econsec0046.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Economics of Security Working Paper Series with number 46.

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Length: 34 p.
Date of creation: 2011
Date of revision:
Handle: RePEc:diw:diweos:diweos46

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Keywords: Governance; Crime; Piracy; Informal Institutions; Law enforcement;

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References

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  1. Avinash Dixit, 2001. "On Modes of Economic Governance," CESifo Working Paper Series, CESifo Group Munich 589, CESifo Group Munich.
  2. Oriana Bandiera, 2003. "Land Reform, the Market for Protection, and the Origins of the Sicilian Mafia: Theory and Evidence," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 19(1), pages 218-244, April.
  3. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(6), pages 1275-88, December.
  4. Anja Shortland & Marc Vothknecht, 2011. "Combating "Maritime Terrorism" off the Coast of Somalia," Economics of Security Working Paper Series, DIW Berlin, German Institute for Economic Research 47, DIW Berlin, German Institute for Economic Research.
  5. Peter T. Leeson, 2009. "The Laws of Lawlessness," The Journal of Legal Studies, University of Chicago Press, University of Chicago Press, vol. 38(2), pages 471-503, 06.
  6. Anja Shortland, 2010. "The Business of Piracy in Somalia," Weekly Report, DIW Berlin, German Institute for Economic Research, DIW Berlin, German Institute for Economic Research, vol. 6(23), pages 182-186.
  7. Yoshiaki Azuma & Herschel I. Grossman, 2002. "A Theory of the Informal Sector," Working Papers, Brown University, Department of Economics 2002-07, Brown University, Department of Economics.
  8. Berger, Helge & Nitsch, Volker, 2008. "Gotcha!: a profile of smuggling in international trade," Discussion Papers, Free University Berlin, School of Business & Economics 2008/6, Free University Berlin, School of Business & Economics.
  9. Olaf J. de Groot & Matthew D. Rablen & Anja Shortland, 2011. "Gov-aargh-nance: "Even Criminals Need Law and Order"," Economics of Security Working Paper Series, DIW Berlin, German Institute for Economic Research 46, DIW Berlin, German Institute for Economic Research.
  10. Leeson, Peter T., 2007. "Better off stateless: Somalia before and after government collapse," Journal of Comparative Economics, Elsevier, Elsevier, vol. 35(4), pages 689-710, December.
  11. Raymond Fisman & Shang-Jin Wei, 2009. "The Smuggling of Art, and the Art of Smuggling: Uncovering the Illicit Trade in Cultural Property and Antiques," American Economic Journal: Applied Economics, American Economic Association, American Economic Association, vol. 1(3), pages 82-96, July.
  12. Soares, Rodrigo R, 2004. "Crime Reporting as a Measure of Institutional Development," Economic Development and Cultural Change, University of Chicago Press, University of Chicago Press, vol. 52(4), pages 851-71, July.
  13. Leeson Peter T. & Williamson Claudia R., 2009. "Anarchy and Development: An Application of the Theory of Second Best," The Law and Development Review, De Gruyter, De Gruyter, vol. 2(1), pages 77-96, July.
  14. Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, Elsevier, vol. 76(3), pages 459-493, June.
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Citations

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Cited by:
  1. Inmaculada Martínez-Zarzoso & Sami Bensassi, 2013. "The Price Of Modern Maritime Piracy," Defence and Peace Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 24(5), pages 397-418, October.
  2. Shortland Anja & Percy Sarah, 2013. "Governance, Naval Intervention and Piracy in Somalia," Peace Economics, Peace Science, and Public Policy, De Gruyter, De Gruyter, vol. 19(2), pages 275-283, August.
  3. Olaf J. de Groot & Matthew D. Rablen & Anja Shortland, 2011. "Gov-aargh-nance: "Even Criminals Need Law and Order"," Economics of Security Working Paper Series, DIW Berlin, German Institute for Economic Research 46, DIW Berlin, German Institute for Economic Research.
  4. Sarah Percy & Anja Shortland, 2010. "The Business of Piracy in Somalia," Discussion Papers of DIW Berlin, DIW Berlin, German Institute for Economic Research 1033, DIW Berlin, German Institute for Economic Research.
  5. Singh Currun & Bedi Arjun Singh, 2013. "Regional Dimensions of Somali Piracy and Militant Islamism: Anthropological and Econometric Evidence," Peace Economics, Peace Science, and Public Policy, De Gruyter, De Gruyter, vol. 19(3), pages 369-380, December.
  6. Olaf J. de Groot & Marc Vothknecht, 2011. "What Can Be Done to Reduce the Occurrence of Piracy in the Short and Long Run?," EUSECON Policy Briefing, DIW Berlin, German Institute for Economic Research 2, DIW Berlin, German Institute for Economic Research.
  7. Olaf J. de Groot & Matthew D. Rablen & Anja Shortland, 2012. "Barrgh-gaining with Somali Pirates," Economics of Security Working Paper Series, DIW Berlin, German Institute for Economic Research 74, DIW Berlin, German Institute for Economic Research.
  8. Michael Brzoska & Raphael Bossong & Eric van Um, 2011. "Security Economics in the European Context: Implications of the EUSECON Project," Economics of Security Working Paper Series, DIW Berlin, German Institute for Economic Research 58, DIW Berlin, German Institute for Economic Research.
  9. Bellais Renaud, 2013. "Fighting Piracy and International Public Goods: The Atalanta Experiment in the Horn of Africa V3," Peace Economics, Peace Science, and Public Policy, De Gruyter, De Gruyter, vol. 19(1), pages 73-101, April.
  10. Anja Shortland & Federico Varese, 2012. "The Business of Pirate Protection," Economics of Security Working Paper Series, DIW Berlin, German Institute for Economic Research 75, DIW Berlin, German Institute for Economic Research.

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