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

Author

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  • Timothy 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.

Suggested Citation

  • Timothy Besley & Thiemo Fetzer & Hannes Mueller, 2012. "One Kind of Lawlessness: Estimating the Welfare Cost of Somali Piracy," Working Papers 626, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:626
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    References listed on IDEAS

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    Cited by:

    1. Flückiger, Matthias & Ludwig, Markus, 2015. "Economic shocks in the fisheries sector and maritime piracy," Journal of Development Economics, Elsevier, pages 107-125.
    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.
    3. Anja Shortland & Federico Varese, 2012. "The Business of Pirate Protection," Economics of Security Working Paper Series 75, DIW Berlin, German Institute for Economic Research.
    4. Flückiger, Matthias & Ludwig, Markus, 2015. "Economic shocks in the fisheries sector and maritime piracy," Journal of Development Economics, Elsevier, pages 107-125.

    More about this item

    Keywords

    piracy; welfare loss; maritime transport; Somalia; private security; law and order; Property rights;

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • F1 - International Economics - - Trade
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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