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Gov-arrrgh-nance: Jolly Rogers and Dodgy Rulers

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  • Olaf J. de Groot
  • Anja Shortland

Abstract

In this paper, we argue that the effect of governance on the emergence of crimes of different levels of sophistication is highly non-linear. State failure, anarchy and a lack of infrastructure are not conducive to establishing any business, including illicit enterprises. At the bottom of the spectrum, therefore, both legal business and criminal gangs benefit from improved governance. With further improvements in governance criminal activities decline. We find strong and consistent support for this hypothesis using the International Maritime Bureau's dataset on piracy. Piracy is reported by ship-owners, giving a unique insight into crime in badly governed countries which were systematically excluded from previous analyses. We show that profitable forms of piracy flourish where on the one hand there is stability and infrastructure, but on the other hand the state does not have the capacity to intervene and/or bureaucrats can be bribed to turn a blind eye. For minor acts of theft from ships the pattern is quadratic: piracy first rises and then falls as governance improves.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.361831.de/dp1063.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1063.

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Length: 43 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwwpp:dp1063

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Keywords: Piracy; illegal behaviour; law enforcement; legal institutions;

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  1. Berger, Helge & Nitsch, Volker, 2008. "Gotcha!: a profile of smuggling in international trade," Discussion Papers 2008/6, Free University Berlin, School of Business & Economics.
  2. Roberto Chang & Linda Kaltani & Norman Loayza, 2005. "Openness Can be Good for Growth: The Role of Policy Complementarities," NBER Working Papers 11787, National Bureau of Economic Research, Inc.
  3. Weill, Laurent, 2009. "Does corruption hamper bank lending? Macro and micro evidence," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 3/2009, Bank of Finland, Institute for Economies in Transition.
  4. 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.
  5. Paolo Buonanno, 2003. "The Socioeconomic Determinants of Crime. A Review of the Literature," Working Papers, University of Milano-Bicocca, Department of Economics 63, University of Milano-Bicocca, Department of Economics, revised Nov 2003.
  6. Peter T. Leeson, 2007. "An-arrgh-chy: The Law and Economics of Pirate Organization," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 115(6), pages 1049-1094, December.
  7. Soares, Rodrigo R, 2004. "Crime Reporting as a Measure of Institutional Development," Economic Development and Cultural Change, University of Chicago Press, vol. 52(4), pages 851-71, July.
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Cited by:
  1. 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 58, DIW Berlin, German Institute for Economic Research.
  2. 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.

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